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Arbitron Inc. (ARB), Millennial Media, Inc. (MM), National CineMedia, Inc. (NCMI): Insiders Are Dumping, Should You?

Is National CineMedia, Inc. (NASDAQ:NCMI) the right pick for your portfolio? Hedge funds are in a bullish mood. The number of long hedge fund bets improved by 1 lately.

If you’d ask most market participants, hedge funds are viewed as underperforming, old investment tools of years past. While there are more than 8000 funds in operation at present, we at Insider Monkey look at the leaders of this group, close to 450 funds. It is widely believed that this group oversees the majority of the smart money’s total asset base, and by keeping an eye on their top stock picks, we have brought to light a few investment strategies that have historically beaten the S&P 500 index. 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Just as integral, positive insider trading sentiment is another way to break down the marketplace. There are lots of reasons for an insider to downsize shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the useful potential of this strategy if piggybackers understand what to do (learn more here).

With all of this in mind, we’re going to take a look at the recent action surrounding National CineMedia, Inc. (NASDAQ:NCMI).

What have hedge funds been doing with National CineMedia, Inc. (NASDAQ:NCMI)?

At year’s end, a total of 15 of the hedge funds we track were long in this stock, a change of 7% from one quarter earlier. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly.

National CineMedia, Inc. (NASDAQ:NCMI)Of the funds we track, Wallace R. Weitz & Co., managed by Wallace Weitz, holds the most valuable position in National CineMedia, Inc. (NASDAQ:NCMI). Wallace R. Weitz & Co. has a $28 million position in the stock, comprising 1.2% of its 13F portfolio. The second largest stake is held by Dorsal Capital Management, managed by Ryan Frick and Oliver Evans, which held a $16 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include Charles Clough’s Clough Capital Partners, Eric Bannasch’s Cadian Capital and Geoffrey Raynor’s Q Investments (Specter Holdings).

As one would reasonably expect, specific money managers were breaking ground themselves. Clough Capital Partners, managed by Charles Clough, established the most outsized position in National CineMedia, Inc. (NASDAQ:NCMI). Clough Capital Partners had 5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0 million position during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington and Steven Cohen’s SAC Capital Advisors.

How have insiders been trading National CineMedia, Inc. (NASDAQ:NCMI)?

Bullish insider trading is most useful when the primary stock in question has seen transactions within the past 180 days. Over the latest half-year time period, National CineMedia, Inc. (NASDAQ:NCMI) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to National CineMedia, Inc. (NASDAQ:NCMI). These stocks are Harte-Hanks, Inc. (NYSE:HHS), Millennial Media, Inc. (NYSE:MM), MDC Partners Inc. (USA) (NASDAQ:MDCA), Arbitron Inc. (NYSE:ARB), and Valassis Communications, Inc. (NYSE:VCI). This group of stocks are in the marketing services industry and their market caps are closest to NCMI’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Harte-Hanks, Inc. (NYSE:HHS) 14 0 1
Millennial Media, Inc. (NYSE:MM) 14 0 25
MDC Partners Inc. (USA) (NASDAQ:MDCA) 8 1 1
Arbitron Inc. (NYSE:ARB) 19 0 6
Valassis Communications, Inc. (NYSE:VCI) 19 0 6

With the returns shown by the aforementioned studies, everyday investors must always monitor hedge fund and insider trading activity, and National CineMedia, Inc. (NASDAQ:NCMI) applies perfectly to this mantra.

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