Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Mitek Systems, Inc. (NASDAQ:MITK).
Is Mitek Systems, Inc. (NASDAQ:MITK) the right pick for your portfolio? Prominent investors are reducing their bets on the stock. The number of long hedge fund positions retreated by 4 lately. Our calculations also showed that MITK isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are viewed as underperforming, old financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at present, Our researchers look at the moguls of this group, around 750 funds. It is estimated that this group of investors manage the majority of the smart money's total capital, and by keeping track of their first-class picks, Insider Monkey has uncovered numerous investment strategies that have historically outrun the market. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the key hedge fund action surrounding Mitek Systems, Inc. (NASDAQ:MITK).
How have hedgies been trading Mitek Systems, Inc. (NASDAQ:MITK)?
At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in MITK a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Park West Asset Management was the largest shareholder of Mitek Systems, Inc. (NASDAQ:MITK), with a stake worth $10.9 million reported as of the end of March. Trailing Park West Asset Management was Raging Capital Management, which amassed a stake valued at $10.6 million. Archon Capital Management, Prescott Group Capital Management, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Mitek Systems, Inc. (NASDAQ:MITK) has experienced declining sentiment from hedge fund managers, we can see that there is a sect of funds who sold off their full holdings by the end of the second quarter. Interestingly, Jack Ripsteen's Potrero Capital Research dumped the largest investment of the 750 funds followed by Insider Monkey, comprising an estimated $5.7 million in call options. Himanshu Gulati's fund, Antara Capital, also said goodbye to its call options, about $5.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 4 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Mitek Systems, Inc. (NASDAQ:MITK) but similarly valued. We will take a look at Eagle Bulk Shipping Inc. (NASDAQ:EGLE), Sunlands Technology Group (NYSE:STG), Haynes International, Inc. (NASDAQ:HAYN), and Kimball Electronics Inc (NASDAQ:KE). This group of stocks' market valuations are similar to MITK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EGLE,9,233972,-1 STG,1,717,-1 HAYN,10,49146,2 KE,9,24740,-1 Average,7.25,77144,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $60 million in MITK's case. Haynes International, Inc. (NASDAQ:HAYN) is the most popular stock in this table. On the other hand Sunlands Technology Group (NYSE:STG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Mitek Systems, Inc. (NASDAQ:MITK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MITK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MITK were disappointed as the stock returned -2.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.