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FARO Technologies, Inc. (FARO): Hedge Fund and Insider Sentiment Unchanged, What Should You Do?

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Is it smart to be bullish on FARO Technologies, Inc. (NASDAQ:FARO)?

Now, according to many traders, hedge funds are assumed to be useless, outdated financial tools of an era lost to time. Although there are over 8,000 hedge funds in operation currently, this site looks at the upper echelon of this group, about 525 funds. It is assumed that this group controls most of the hedge fund industry’s total capital, and by tracking their highest performing equity investments, we’ve discovered a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy beat 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 outpaced the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as useful, positive insider trading sentiment is a second way to look at the marketplace. There are many incentives for an executive to downsize shares of his or her company, but only one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this method if shareholders know where to look (learn more here).

What’s more, let’s examine the latest info for FARO Technologies, Inc. (NASDAQ:FARO).

Hedge fund activity in FARO Technologies, Inc. (NASDAQ:FARO)

Heading into Q3, a total of 13 of the hedge funds we track held long positions in this stock, a change of 0% from one quarter earlier. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes meaningfully.

FARO Technologies, Inc. (NASDAQ:FARO)Out of the hedge funds we follow, Chuck Royce’s Royce & Associates had the most valuable position in FARO Technologies, Inc. (NASDAQ:FARO), worth close to $26.5 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which held a $3.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedgies that are bullish include Jim Simons’s Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Joel Greenblatt’s Gotham Asset Management.

Judging by the fact that FARO Technologies, Inc. (NASDAQ:FARO) has witnessed bearish sentiment from upper-tier hedge fund managers, it’s easy to see that there is a sect of fund managers who were dropping their full holdings last quarter. Interestingly, Gregory A. Weaver’s Invicta Capital Management dropped the largest position of the 450+ funds we track, worth an estimated $6.7 million in stock, and Ken Grossman and Glen Schneider of SG Capital Management was right behind this move, as the fund sold off about $3 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Insider trading activity in FARO Technologies, Inc. (NASDAQ:FARO)

Insider buying made by high-level executives is best served when the primary stock in question has experienced transactions within the past 180 days. Over the latest 180-day time period, FARO Technologies, Inc. (NASDAQ:FARO) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to FARO Technologies, Inc. (NASDAQ:FARO). These stocks are Analogic Corporation (NASDAQ:ALOG), MTS Systems Corporation (NASDAQ:MTSC), Measurement Specialties, Inc. (NASDAQ:MEAS), Badger Meter, Inc. (NYSE:BMI), and Rofin-Sinar Technologies (NASDAQ:RSTI). This group of stocks are the members of the scientific & technical instruments industry and their market caps are closest to FARO’s market cap.

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