Should You Buy Pegasystems Inc. (PEGA)?

Pegasystems Inc. (NASDAQ:PEGA) was in 6 hedge funds’ portfolio at the end of the fourth quarter of 2012. PEGA investors should be aware of an increase in hedge fund sentiment lately. There were 4 hedge funds in our database with PEGA positions at the end of the previous quarter.

In today’s marketplace, there are tons of methods shareholders can use to watch Mr. Market. A duo of the most underrated are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the best investment managers can outpace their index-focused peers by a superb amount (see just how much).

Just as key, bullish insider trading sentiment is another way to parse down the marketplace. Obviously, there are a number of reasons for an insider to drop shares of his or her company, but only one, very clear reason why they would behave bullishly. Several academic studies have demonstrated the valuable potential of this strategy if you understand what to do (learn more here).

Now, it’s important to take a glance at the recent action encompassing Pegasystems Inc. (NASDAQ:PEGA).

How are hedge funds trading Pegasystems Inc. (NASDAQ:PEGA)?

At year’s end, a total of 6 of the hedge funds we track were long in this stock, a change of 50% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes significantly.

According to our comprehensive database, Ken Fisher’s Fisher Asset Management had the biggest position in Pegasystems Inc. (NASDAQ:PEGA), worth close to $16.5 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Spencer M. Waxman of Shannon River Fund Management, with a $9.9 million position; 1.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include Ken Griffin’s Citadel Investment Group, Jim Simons’s Renaissance Technologies and Chuck Royce’s Royce & Associates.

Consequently, specific money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, established the most outsized position in Pegasystems Inc. (NASDAQ:PEGA). Renaissance Technologies had 1.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.3 million position during the quarter.

What do corporate executives and insiders think about Pegasystems Inc. (NASDAQ:PEGA)?

Insider buying is best served when the company in focus has experienced transactions within the past six months. Over the latest 180-day time period, Pegasystems Inc. (NASDAQ:PEGA) has experienced zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Pegasystems Inc. (NASDAQ:PEGA). These stocks are Blackbaud, Inc. (NASDAQ:BLKB), Interactive Intelligence Group Inc (NASDAQ:ININ), MicroStrategy Incorporated (NASDAQ:MSTR), NetScout Systems, Inc. (NASDAQ:NTCT), and Bottomline Technologies (NASDAQ:EPAY). All of these stocks are in the business software & services industry and their market caps resemble PEGA’s market cap.

With the returns demonstrated by the aforementioned research, retail investors must always watch hedge fund and insider trading sentiment, and Pegasystems Inc. (NASDAQ:PEGA) is no exception.

Click here to learn why you should track hedge funds