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Foot Locker, Inc. (NYSE:FL): Hedge Funds and Insiders Are Bearish, What Should You Do?

Foot Locker, Inc. (NYSE:FL) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months.

If you’d ask most market participants, hedge funds are viewed as underperforming, old investment tools of yesteryear. While there are over 8000 funds in operation at present, we at Insider Monkey choose to focus on the elite of this group, close to 450 funds. It is estimated that this group controls the lion’s share of the smart money’s total capital, and by monitoring their best equity investments, we have come up with a number of investment strategies that have historically outstripped 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 trumped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Foot Locker, Inc. (NYSE:FL)Just as important, optimistic insider trading activity is another way to break down the financial markets. As the old adage goes: there are lots of reasons for an insider to downsize shares of his or her company, but only one, very obvious reason why they would buy. Several empirical studies have demonstrated the valuable potential of this tactic if investors know where to look (learn more here).

With these “truths” under our belt, we’re going to take a look at the latest action regarding Foot Locker, Inc. (NYSE:FL).

What have hedge funds been doing with Foot Locker, Inc. (NYSE:FL)?

At year’s end, a total of 28 of the hedge funds we track were long in this stock, a change of -3% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully.

When looking at the hedgies we track, Capital Growth Management, managed by Ken Heebner, holds the largest position in Foot Locker, Inc. (NYSE:FL). Capital Growth Management has a $85 million position in the stock, comprising 2.2% of its 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which held a $66 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include David Keidan’s Buckingham Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Because Foot Locker, Inc. (NYSE:FL) has experienced declining sentiment from hedge fund managers, we can see that there was a specific group of fund managers who sold off their entire stakes heading into 2013. At the top of the heap, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC dropped the biggest stake of all the hedgies we track, comprising about $51 million in stock., and Louis Navellier of Navellier & Associates was right behind this move, as the fund sold off about $45 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds heading into 2013.

Insider trading activity in Foot Locker, Inc. (NYSE:FL)

Bullish insider trading is at its handiest when the company in question has seen transactions within the past 180 days. Over the last six-month time period, Foot Locker, Inc. (NYSE:FL) has experienced zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

With the returns exhibited by Insider Monkey’s strategies, everyday investors must always pay attention to hedge fund and insider trading activity, and Foot Locker, Inc. (NYSE:FL) shareholders fit into this picture quite nicely.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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