The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards SciQuest, Inc. (NASDAQ:SQI) and see how it was affected.
Hedge fund interest in SciQuest, Inc. (NASDAQ:SQI) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SQI to other stocks including Hi-Crush Partners LP (NYSE:HCLP), Pacific Ethanol Inc (NASDAQ:PEIX), and KemPharm Inc (NASDAQ:KMPH) to get a better sense of its popularity.
Follow Sciquest Inc (NASDAQ:SQI)
Follow Sciquest Inc (NASDAQ:SQI)
To the average investor there are tons of gauges market participants employ to appraise their holdings. A couple of the most useful gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the broader indices by a solid amount (see the details here).
With all of this in mind, let’s take a peek at the fresh action surrounding SciQuest, Inc. (NASDAQ:SQI).
Hedge fund activity in SciQuest, Inc. (NASDAQ:SQI)
When looking at the institutional investors followed by Insider Monkey, RGM Capital, managed by Robert G. Moses, holds the number one position in SciQuest, Inc. (NASDAQ:SQI). RGM Capital has a $27.1 million position in the stock, comprising 3.6% of its 13F portfolio. The second most bullish fund manager is Discovery Group, led by Michael Murphy and Daniel Donoghue, holding a $12.4 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include George McCabe’s Portolan Capital Management, Jim Simons’s Renaissance Technologies and Jim Tarantino and Chris Galvin’s Westerly Capital Management.
At the top of the heap, Ira Unschuld’s Brant Point Investment Management cut the biggest investment of all the hedgies monitored by Insider Monkey, totaling about $4 million in stock. Lee Munder’s fund, Lee Munder Capital Group, also sold off its stock, about $2.3 million worth.
Let’s go over hedge fund activity in other stocks similar to SciQuest, Inc. (NASDAQ:SQI) on the next page. These stocks are Hi-Crush Partners LP (NYSE:HCLP), Pacific Ethanol Inc (NASDAQ:PEIX), KemPharm Inc (NASDAQ:KMPH), and NeoPhotonics Corp (NYSE:NPTN). This group of stocks’ market valuations are closest to SQI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HCLP | 11 | 14719 | 2 |
| PEIX | 13 | 22055 | -5 |
| KMPH | 8 | 60941 | -2 |
| NPTN | 13 | 59956 | -5 |
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $58 million in SQI’s case. Pacific Ethanol Inc (NASDAQ:PEIX) is the most popular stock in this table. On the other hand KemPharm Inc (NASDAQ:KMPH) is the least popular one with only 8 bullish hedge fund positions. SciQuest, Inc. (NASDAQ:SQI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PEIX might be a better candidate to consider a long position.
