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Harsco Corporation (HSC): Hedge Funds and Insiders Are Bearish, What Should You Do?

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Is Harsco Corporation (NYSE:HSC) ready to rally soon? Investors who are in the know are selling. The number of long hedge fund positions decreased by 4 lately.

Harsco Corporation (NYSE:HSC)In the eyes of most market participants, hedge funds are seen as unimportant, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation today, we look at the crème de la crème of this club, close to 450 funds. It is estimated that this group has its hands on the majority of all hedge funds’ total capital, and by watching their top picks, we have deciphered a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outpaced 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as important, positive insider trading sentiment is a second way to parse down the investments you’re interested in. Obviously, there are many reasons for an insider to downsize shares of his or her company, but just one, very obvious reason why they would buy. Plenty of academic studies have demonstrated the useful potential of this tactic if you understand where to look (learn more here).

Keeping this in mind, let’s take a look at the latest action regarding Harsco Corporation (NYSE:HSC).

What have hedge funds been doing with Harsco Corporation (NYSE:HSC)?

Heading into Q2, a total of 13 of the hedge funds we track were bullish in this stock, a change of -24% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly.

Of the funds we track, Pzena Investment Management, managed by Richard S. Pzena, holds the most valuable position in Harsco Corporation (NYSE:HSC). Pzena Investment Management has a $22.4 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Steven Cohen of SAC Capital Advisors, with a $20.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedgies that are bullish include Cliff Asness’s AQR Capital Management, David Dreman’s Dreman Value Management and Ken Griffin’s Citadel Investment Group.

Because Harsco Corporation (NYSE:HSC) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of funds that decided to sell off their positions entirely in Q1. Intriguingly, Mark Kingdon’s Kingdon Capital dumped the biggest investment of the 450+ funds we key on, valued at an estimated $7.1 million in stock., and Glenn Russell Dubin of Highbridge Capital Management was right behind this move, as the fund dropped about $0.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds in Q1.

What do corporate executives and insiders think about Harsco Corporation (NYSE:HSC)?

Insider purchases made by high-level executives is most useful when the primary stock in question has seen transactions within the past half-year. Over the last six-month time frame, Harsco Corporation (NYSE:HSC) has seen 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 Harsco Corporation (NYSE:HSC). These stocks are SunCoke Energy, Inc (NYSE:SXC), United States Steel Corporation (NYSE:X), Mechel OAO (ADR) (NYSE:MTL) and Commercial Metals Company (NYSE:CMC). This group of stocks are in the steel & iron industry and their market caps are closest to HSC’s market cap.

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