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Dresser-Rand Group Inc. (DRC): Hedge Funds Are Bullish and Insiders Are Undecided, What Should You Do?

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Should Dresser-Rand Group Inc. (NYSE:DRC) investors track the following data?

To many of your peers, hedge funds are assumed to be bloated, old investment vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds with their doors open today, this site focuses on the leaders of this group, close to 525 funds. Analysts calculate that this group oversees the lion’s share of the smart money’s total capital, and by keeping an eye on their best stock picks, we’ve come up with a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

Just as crucial, positive insider trading activity is a second way to look at the marketplace. Obviously, there are plenty of reasons for a corporate insider to sell shares of his or her company, but just one, very obvious reason why they would buy. Plenty of 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 recent info about Dresser-Rand Group Inc. (NYSE:DRC).

How have hedgies been trading Dresser-Rand Group Inc. (NYSE:DRC)?

At Q2’s end, a total of 24 of the hedge funds we track were long in this stock, a change of 50% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably.

Dresser-Rand Group Inc. (NYSE:DRC)When using filings from the hedgies we track, David Cohen and Harold Levy’s Iridian Asset Management had the largest position in Dresser-Rand Group Inc. (NYSE:DRC), worth close to $237.9 million, comprising 3% of its total 13F portfolio. On Iridian Asset Management’s heels is Harris Associates, managed by Natixis Global Asset Management, which held a $154 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Matt McLennan’s First Eagle Investment Management, John A. Levin’s Levin Capital Strategies and Phill Gross and Robert Atchinson’s Adage Capital Management.

As one would understandably expect, certain bigger names were leading the bulls’ herd. Iridian Asset Management, managed by David Cohen and Harold Levy, created the largest position in Dresser-Rand Group Inc. (NYSE:DRC). Iridian Asset Management had 237.9 million invested in the company at the end of the quarter. Matt McLennan’s First Eagle Investment Management also initiated a $53.6 million position during the quarter. The other funds with new positions in the stock are John A. Levin’s Levin Capital Strategies, Phill Gross and Robert Atchinson’s Adage Capital Management, and Jim Simons’s Renaissance Technologies.

How are insiders trading Dresser-Rand Group Inc. (NYSE:DRC)?

Insider buying made by high-level executives is best served when the company in focus has seen transactions within the past six months. Over the latest half-year time period, Dresser-Rand Group Inc. (NYSE:DRC) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to Dresser-Rand Group Inc. (NYSE:DRC). These stocks are Nordson Corporation (NASDAQ:NDSN), Xylem Inc (NYSE:XYL), Avery Dennison Corp (NYSE:AVY), Colfax Corp (NYSE:CFX), and IDEX Corporation (NYSE:IEX). All of these stocks are in the diversified machinery industry and their market caps match DRC’s market cap.

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