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 900 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 Mimecast Limited (NASDAQ:MIME).
Is MIME stock a buy? Mimecast Limited (NASDAQ:MIME) investors should be aware of an increase in activity from the world's largest hedge funds of late. Mimecast Limited (NASDAQ:MIME) was in 28 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 39. Our calculations also showed that MIME isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to go over the new hedge fund action regarding Mimecast Limited (NASDAQ:MIME).
Do Hedge Funds Think MIME Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MIME over the last 22 quarters. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Mimecast Limited (NASDAQ:MIME) was held by Arrowstreet Capital, which reported holding $16.8 million worth of stock at the end of December. It was followed by Bares Capital Management with a $16.7 million position. Other investors bullish on the company included GLG Partners, Lakewood Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Washington Harbour Partners allocated the biggest weight to Mimecast Limited (NASDAQ:MIME), around 1.38% of its 13F portfolio. Kingdon Capital is also relatively very bullish on the stock, designating 1.07 percent of its 13F equity portfolio to MIME.
As aggregate interest increased, key money managers were breaking ground themselves. Lakewood Capital Management, managed by Anthony Bozza, assembled the largest position in Mimecast Limited (NASDAQ:MIME). Lakewood Capital Management had $14.2 million invested in the company at the end of the quarter. Mina Faltas's Washington Harbour Partners also made a $7.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser's Magnetar Capital, Dmitry Balyasny's Balyasny Asset Management, and Greg Eisner's Engineers Gate Manager.
Let's also examine hedge fund activity in other stocks similar to Mimecast Limited (NASDAQ:MIME). These stocks are WD-40 Company (NASDAQ:WDFC), W.R. Grace & Co. (NYSE:GRA), John Bean Technologies Corporation (NYSE:JBT), BMC Stock Holdings, Inc. (NASDAQ:BMCH), Celsius Holdings, Inc. (NASDAQ:CELH), WNS (Holdings) Limited (NYSE:WNS), and FuelCell Energy, Inc. (NASDAQ:FCEL). All of these stocks' market caps match MIME's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WDFC,15,174748,-2 GRA,40,1259267,1 JBT,13,116188,-8 BMCH,30,786694,-1 CELH,19,160683,2 WNS,23,288430,2 FCEL,15,130882,-2 Average,22.1,416699,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $135 million in MIME's case. W.R. Grace & Co. (NYSE:GRA) is the most popular stock in this table. On the other hand John Bean Technologies Corporation (NYSE:JBT) is the least popular one with only 13 bullish hedge fund positions. Mimecast Limited (NASDAQ:MIME) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MIME is 57.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately MIME wasn't nearly as popular as these 30 stocks and hedge funds that were betting on MIME were disappointed as the stock returned -27.2% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.