This Metric Says You Are Smart to Buy Zix Corporation (ZIXI)

Zix Corporation (NASDAQ:ZIXI) was in 7 hedge funds’ portfolio at the end of December. ZIXI shareholders have witnessed an increase in enthusiasm from smart money lately. There were 4 hedge funds in our database with ZIXI positions at the end of the previous quarter.

According to most shareholders, hedge funds are perceived as unimportant, outdated financial tools of years past. While there are greater than 8000 funds trading at the moment, we at Insider Monkey hone in on the upper echelon of this club, close to 450 funds. It is widely believed that this group has its hands on the lion’s share of the hedge fund industry’s total capital, and by monitoring their best investments, we have formulated a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Just as important, bullish insider trading activity is a second way to parse down the marketplace. Just as you’d expect, there are many reasons for a bullish insider to drop shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the valuable potential of this method if shareholders understand what to do (learn more here).

Now, it’s important to take a glance at the latest action encompassing Zix Corporation (NASDAQ:ZIXI).

How are hedge funds trading Zix Corporation (NASDAQ:ZIXI)?

In preparation for this year, a total of 7 of the hedge funds we track held long positions in this stock, a change of 75% from one quarter earlier. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably.

As one would reasonably expect, key hedge funds have been driving this bullishness. Moore Global Investments, managed by Louis Bacon, created the most outsized position in Zix Corporation (NASDAQ:ZIXI). Moore Global Investments had 0.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.2 million position during the quarter. The following funds were also among the new ZIXI investors: Ken Griffin’s Citadel Investment Group, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Ken Griffin’s Citadel Investment Group.

How have insiders been trading Zix Corporation (NASDAQ:ZIXI)?

Insider trading activity, especially when it’s bullish, is particularly usable when the primary stock in question has seen transactions within the past six months. Over the last half-year time frame, Zix Corporation (NASDAQ:ZIXI) has seen 1 unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Zix Corporation (NASDAQ:ZIXI). These stocks are Unwired Planet Inc (NASDAQ:UPIP), Market Leader Inc (NASDAQ:LEDR), QAD Inc. (NASDAQ:QADA), American Software, Inc. (NASDAQ:AMSWA), and Agilysys, Inc. (NASDAQ:AGYS). This group of stocks belong to the application software industry and their market caps resemble ZIXI’s market cap.