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Cato Corp (CATO): Insiders Are Buying, Should You?

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Cato Corp (NYSE:CATO) was in 5 hedge funds’ portfolio at the end of the fourth quarter of 2012. CATO has experienced a decrease in support from the world’s most elite money managers recently. There were 7 hedge funds in our database with CATO positions at the end of the previous quarter.

Cato Corp (NYSE:CATO)

In the 21st century investor’s toolkit, there are dozens of indicators investors can use to watch the equity markets. A duo of the best are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the top investment managers can outclass the broader indices by a significant amount (see just how much).

Equally as important, bullish insider trading activity is a second way to break down the investments you’re interested in. Obviously, there are a variety of motivations for a corporate insider to cut shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the impressive potential of this method if investors understand where to look (learn more here).

Now, let’s take a look at the latest action encompassing Cato Corp (NYSE:CATO).

What does the smart money think about Cato Corp (NYSE:CATO)?

In preparation for this year, a total of 5 of the hedge funds we track were bullish in this stock, a change of -29% from the previous quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings significantly.

Of the funds we track, Royce & Associates, managed by Chuck Royce, holds the largest position in Cato Corp (NYSE:CATO). Royce & Associates has a $114.8 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Cliff Asness of AQR Capital Management, with a $9.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish include Jim Simons’s Renaissance Technologies, Paul Tudor Jones’s Tudor Investment Corp and Ken Griffin’s Citadel Investment Group.

Since Cato Corp (NYSE:CATO) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies who were dropping their positions entirely heading into 2013. At the top of the heap, D. E. Shaw’s D E Shaw dumped the largest stake of the 450+ funds we monitor, worth close to $0.6 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into 2013.

How have insiders been trading Cato Corp (NYSE:CATO)?

Insider trading activity, especially when it’s bullish, is most useful when the primary stock in question has seen transactions within the past 180 days. Over the last 180-day time frame, Cato Corp (NYSE:CATO) has seen 1 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Cato Corp (NYSE:CATO). These stocks are Children’s Place Retail Stores, Inc. (NASDAQ:PLCE), The Jones Group Inc. (NYSE:JNY), Hot Topic, Inc. (NASDAQ:HOTT), Stage Stores Inc (NYSE:SSI), and rue21, inc. (NASDAQ:RUE). All of these stocks are in the apparel stores industry and their market caps are similar to CATO’s market cap.

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