In the eyes of many investors, hedge funds are assumed to be bloated, outdated investment tools of a forgotten age. Although there are In excess of 8,000 hedge funds trading in present day, Insider Monkey looks at the top tier of this club, close to 525 funds. Analysts calculate that this group has its hands on the lion's share of the smart money's total assets, and by keeping an eye on their best stock picks, we've identified a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 outclassed the S&P 500 index by 33 percentage points in 11 months (find the details here).
Just as useful, bullish insider trading activity is a second way to look at the financial markets. There are a variety of reasons for an insider to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the market-beating potential of this method if shareholders know where to look (learn more here).
Furthermore, it's important to examine the latest info about LeapFrog Enterprises, Inc. (NYSE:LF).
At Q2's end, a total of 17 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly.
When using filings from the hedgies we track, Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, holds the most valuable position in LeapFrog Enterprises, Inc. (NYSE:LF). Blue Mountain Capital has a $19.7 million position in the stock, comprising 0.8% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which held a $4.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Joel Greenblatt's Gotham Asset Management, Geoffrey Raynor's Q Investments (Specter Holdings) and John Fichthorn's Dialectic Capital Management.
Because LeapFrog Enterprises, Inc. (NYSE:LF) has witnessed a fall in interest from the top-tier hedge fund industry, it's safe to say that there were a few hedge funds who sold off their positions entirely in Q1. Interestingly, Jim Simons's Renaissance Technologies dropped the largest stake of the "upper crust" of funds we monitor, worth an estimated $5.2 million in stock, and Robert B. Gillam of Mckinley Capital Management was right behind this move, as the fund sold off about $2.4 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Legal insider trading, particularly when it's bullish, is particularly usable when the company in focus has seen transactions within the past 180 days. Over the latest half-year time frame, LeapFrog Enterprises, Inc. (NYSE:LF) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
We'll go over the relationship between both of these indicators in other stocks similar to LeapFrog Enterprises, Inc. (NYSE:LF). These stocks are Mattel, Inc. (NASDAQ:MAT), Kid Brands Inc (NYSE:KID), Hasbro, Inc. (NASDAQ:HAS), Gaming Partners International Corp. (NASDAQ:GPIC), and JAKKS Pacific, Inc. (NASDAQ:JAKK). All of these stocks are in the toys & games industry and their market caps are closest to LF's market cap.