Is Farmer Brothers Co. (NASDAQ:FARM) a safe investment today? The best stock pickers are in a bullish mood. The number of bullish hedge fund bets inched up by 2 recently.
To most stock holders, hedge funds are seen as worthless, old financial vehicles of yesteryear. While there are over 8000 funds in operation today, we look at the bigwigs of this group, around 450 funds. Most estimates calculate that this group controls most of the smart money’s total capital, and by keeping an eye on their highest performing investments, we have formulated a number of investment strategies that have historically outstripped 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 24 percentage points in 7 months (explore the details and some picks here).
Just as integral, positive insider trading activity is another way to parse down the world of equities. Just as you’d expect, there are a variety of reasons for an executive to cut shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this method if shareholders know where to look (learn more here).
With these “truths” under our belt, we’re going to take a peek at the latest action regarding Farmer Brothers Co. (NASDAQ:FARM).
How are hedge funds trading Farmer Brothers Co. (NASDAQ:FARM)?
Heading into 2013, a total of 8 of the hedge funds we track were long in this stock, a change of 33% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes substantially.
When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the largest position in Farmer Brothers Co. (NASDAQ:FARM). Royce & Associates has a $8 million position in the stock, comprising 0% of its 13F portfolio. The second largest stake is held by MFP Investors, managed by Michael Price, which held a $5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Joseph A. Jolson’s Harvest Capital Strategies and Mark Broach’s Manatuck Hill Partners.
As industrywide interest jumped, some big names have jumped into Farmer Brothers Co. (NASDAQ:FARM) headfirst. Manatuck Hill Partners, managed by Mark Broach, established the largest position in Farmer Brothers Co. (NASDAQ:FARM). Manatuck Hill Partners had 0 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0 million position during the quarter. The only other fund with a new position in the stock is John Overdeck and David Siegel’s Two Sigma Advisors.
What do corporate executives and insiders think about Farmer Brothers Co. (NASDAQ:FARM)?
Insider trading activity, especially when it’s bullish, is most useful when the company in question has seen transactions within the past six months. Over the last six-month time period, Farmer Brothers Co. (NASDAQ:FARM) has seen 1 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Farmer Brothers Co. (NASDAQ:FARM). These stocks are Inventure Foods Inc (NASDAQ:SNAK), Seneca Foods Corp (NASDAQ:SENEB), Seneca Foods Corp (NASDAQ:SENEA), John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), and Omega Protein Corporation (NYSE:OME). This group of stocks are in the processed & packaged goods industry and their market caps are closest to FARM’s market cap.