Aeropostale, Inc. (NYSE:ARO), Children’s Place Retail Stores: Stage Stores Inc (NYSE:SSI): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Is Stage Stores Inc (NYSE:SSI) a superb investment now? Money managers are becoming hopeful. The number of long hedge fund bets moved up by 2 recently.

To most shareholders, hedge funds are viewed as slow, old financial vehicles of yesteryear. While there are over 8000 funds with their doors open at present, we hone in on the top tier of this club, close to 450 funds. It is widely believed that this group controls most of the hedge fund industry’s total capital, and by tracking their highest performing investments, we have spotted a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Stage Stores Inc (NYSE:SSI)

Equally as important, optimistic insider trading activity is a second way to parse down the stock market universe. Just as you’d expect, there are a number of incentives for a bullish insider to downsize shares of his or her company, but only one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this method if you understand where to look (learn more here).

With all of this in mind, it’s important to take a peek at the key action regarding Stage Stores Inc (NYSE:SSI).

Hedge fund activity in Stage Stores Inc (NYSE:SSI)

At the end of the fourth quarter, a total of 15 of the hedge funds we track were long in this stock, a change of 15% from the third quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably.

According to our comprehensive database, Manatuck Hill Partners, managed by Mark Broach, holds the biggest position in Stage Stores Inc (NYSE:SSI). Manatuck Hill Partners has a $23 million position in the stock, comprising 3.4% of its 13F portfolio. Coming in second is SAC Capital Advisors, managed by Steven Cohen, which held a $9 million position; the fund has 0% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Alexander Mitchell’s Scopus Asset Management, D. E. Shaw’s D E Shaw and Alexander Mitchell’s Scopus Asset Management.

As aggregate interest increased, some big names were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, created the most outsized call position in Stage Stores Inc (NYSE:SSI). Scopus Asset Management had 5 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $2 million position during the quarter. The following funds were also among the new SSI investors: Donald Chiboucis’s Columbus Circle Investors, David Keidan’s Buckingham Capital Management, and John A. Levin’s Levin Capital Strategies.

What have insiders been doing with Stage Stores Inc (NYSE:SSI)?

Insider trading activity, especially when it’s bullish, is most useful when the company in question has seen transactions within the past half-year. Over the last 180-day time frame, Stage Stores Inc (NYSE:SSI) has seen zero unique insiders buying, and 3 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Stage Stores Inc (NYSE:SSI). These stocks are Aeropostale, Inc. (NYSE:ARO), Children’s Place Retail Stores, Inc. (NASDAQ:PLCE), The Jones Group Inc. (NYSE:JNY), rue21, inc. (NASDAQ:RUE), and Cato Corp (NYSE:CATO). This group of stocks are the members of the apparel stores industry and their market caps resemble SSI’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Aeropostale, Inc. (NYSE:ARO) 27 0 0
Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) 18 1 4
The Jones Group Inc. (NYSE:JNY) 13 0 3
rue21, inc. (NASDAQ:RUE) 5 0 5
Cato Corp (NYSE:CATO) 5 1 1

With the returns exhibited by the aforementioned strategies, retail investors must always watch hedge fund and insider trading sentiment, and Stage Stores Inc (NYSE:SSI) is an important part of this process.

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