Should You Avoid SAP AG (ADR) (SAP)?

SAP AG (ADR) (NYSE:SAP) investors should be aware of a decrease in hedge fund sentiment of late.

In the 21st century investor’s toolkit, there are a multitude of methods investors can use to watch their holdings. A duo of the most innovative are hedge fund and insider trading sentiment. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform the broader indices by a significant margin (see just how much).

Just as key, optimistic insider trading sentiment is another way to break down the stock market universe. Obviously, there are lots of reasons for an insider to cut shares of his or her company, but just one, very simple reason why they would buy. Various empirical studies have demonstrated the impressive potential of this strategy if “monkeys” understand where to look (learn more here).

With these “truths” under our belt, we’re going to take a look at the latest action surrounding SAP AG (ADR) (NYSE:SAP).

How have hedgies been trading SAP AG (ADR) (NYSE:SAP)?

In preparation for this quarter, a total of 10 of the hedge funds we track were long in this stock, a change of -23% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly.

When looking at the hedgies we track, Ken Fisher’s Fisher Asset Management had the most valuable position in SAP AG (ADR) (NYSE:SAP), worth close to $507 million, accounting for 1.3% of its total 13F portfolio. Coming in second is James Melcher of Balestra, with a $30.7 million position; 6.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include Matthew Iorio’s White Elm Capital, and Matthew Tewksbury’s Stevens Capital Management.

Seeing as SAP AG (ADR) (NYSE:SAP) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds who sold off their positions entirely in Q1. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest stake of the 450+ funds we watch, worth an estimated $16.6 million in stock., and SAC Subsidiary of Sigma Capital Management was right behind this move, as the fund said goodbye to about $12.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds in Q1.

Insider trading activity in SAP AG (ADR) (NYSE:SAP)

Insider trading activity, especially when it’s bullish, is particularly usable when the primary stock in question has experienced transactions within the past half-year. Over the last half-year time frame, SAP AG (ADR) (NYSE:SAP) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to SAP AG (ADR) (NYSE:SAP). These stocks are Intuit Inc. (NASDAQ:INTU), Adobe Systems Incorporated (NASDAQ:ADBE), salesforce.com, inc. (NYSE:CRM), Microsoft Corporation (NASDAQ:MSFT), and Oracle Corporation (NASDAQ:ORCL). This group of stocks belong to the application software industry and their market caps are closest to SAP’s market cap.