Armstrong World Industries, Inc. (NYSE:AWI) investors should pay attention to an increase in hedge fund interest recently.
According to most market participants, hedge funds are seen as worthless, outdated investment tools of yesteryear. While there are more than 8000 funds trading at the moment, we hone in on the elite of this club, close to 450 funds. It is estimated that this group has its hands on the majority of the hedge fund industry's total capital, and by watching their best picks, we have uncovered a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outstripped 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 trumped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Equally as beneficial, bullish insider trading activity is a second way to parse down the marketplace. As the old adage goes: there are plenty of motivations for a corporate insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Many empirical studies have demonstrated the market-beating potential of this method if shareholders know what to do (learn more here).
With these "truths" under our belt, we're going to take a peek at the latest action encompassing Armstrong World Industries, Inc. (NYSE:AWI).
Heading into Q2, a total of 20 of the hedge funds we track held long positions in this stock, a change of 11% from one quarter earlier. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially.
When looking at the hedgies we track, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the biggest position in Armstrong World Industries, Inc. (NYSE:AWI). Adage Capital Management has a $144 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $73.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Mariko Gordon's Daruma Asset Management, Steven Cohen's SAC Capital Advisors and Ken Griffin's Citadel Investment Group.
Now, some big names were breaking ground themselves. Standard Pacific Capital, managed by Douglas Dillard Jr. and Raj D. Venkatesan, established the most outsized position in Armstrong World Industries, Inc. (NYSE:AWI). Standard Pacific Capital had 8.5 million invested in the company at the end of the quarter. Andrew Sandler's Sandler Capital Management also made a $8.4 million investment in the stock during the quarter. The following funds were also among the new AWI investors: Richard S. Meisenberg's ACK Asset Management, Anna Nikolayevsky's Axel Capital Management, and John Fichthorn's Dialectic Capital Management.
Insider buying is at its handiest when the company we're looking at has experienced transactions within the past half-year. Over the latest six-month time frame, Armstrong World Industries, Inc. (NYSE:AWI) has experienced zero unique insiders buying, and 4 insider sales (see the details of insider trades here).
Let's go over hedge fund and insider activity in other stocks similar to Armstrong World Industries, Inc. (NYSE:AWI). These stocks are Masco Corporation (NYSE:MAS), Vulcan Materials Company (NYSE:VMC), Owens Corning (NYSE:OC), Martin Marietta Materials, Inc. (NYSE:MLM), and USG Corporation (NYSE:USG). This group of stocks are the members of the general building materials industry and their market caps are similar to AWI's market cap.