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ESCO Technologies Inc. (ESE): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

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ESCO Technologies Inc. (NYSE:ESE) was in 7 hedge funds’ portfolio at the end of the fourth quarter of 2012. ESE shareholders have witnessed an increase in hedge fund interest lately. There were 6 hedge funds in our database with ESE positions at the end of the previous quarter.

esco technologies logo

In the eyes of most traders, hedge funds are assumed to be unimportant, old financial tools of yesteryear. While there are greater than 8000 funds in operation at present, we at Insider Monkey hone in on the elite of this club, about 450 funds. It is widely believed that this group controls the lion’s share of the smart money’s total capital, and by monitoring their best investments, we have found a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outperformed 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 24 percentage points in 7 months (see all of our picks from August).

Equally as integral, bullish insider trading activity is another way to parse down the marketplace. Obviously, there are plenty of incentives for a corporate insider to sell shares of his or her company, but only one, very simple reason why they would behave bullishly. Many empirical studies have demonstrated the market-beating potential of this tactic if you understand where to look (learn more here).

Keeping this in mind, it’s important to take a look at the latest action encompassing ESCO Technologies Inc. (NYSE:ESE).

How are hedge funds trading ESCO Technologies Inc. (NYSE:ESE)?

In preparation for this year, a total of 7 of the hedge funds we track were bullish in this stock, a change of 17% from the third quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially.

According to our comprehensive database, Levin Capital Strategies, managed by John A. Levin, holds the biggest position in ESCO Technologies Inc. (NYSE:ESE). Levin Capital Strategies has a $8.5 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Renaissance Technologies, managed by Jim Simons, which held a $2.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Andy Redleaf’s Whitebox Advisors, Phill Gross and Robert Atchinson’s Adage Capital Management and Israel Englander’s Millennium Management.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, created the biggest position in ESCO Technologies Inc. (NYSE:ESE). Renaissance Technologies had 2.6 million invested in the company at the end of the quarter. Andy Redleaf’s Whitebox Advisors also made a $1.2 million investment in the stock during the quarter. The only other fund with a brand new ESE position is Ken Gray and Steve Walsh’s Bryn Mawr Capital.

What do corporate executives and insiders think about ESCO Technologies Inc. (NYSE:ESE)?

Insider buying is best served when the company we’re looking at has seen transactions within the past half-year. Over the latest six-month time period, ESCO Technologies Inc. (NYSE:ESE) has experienced zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to ESCO Technologies Inc. (NYSE:ESE). These stocks are MTS Systems Corporation (NASDAQ:MTSC), Analogic Corporation (NASDAQ:ALOG), Cubic Corporation (NYSE:CUB), II-VI, Inc. (NASDAQ:IIVI), and Ion Geophysical Corp (NYSE:IO). This group of stocks belong to the scientific & technical instruments industry and their market caps resemble ESE’s market cap.

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