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Hedge Funds Are Buying Kadant Inc. (KAI)

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Kadant Inc. (NYSE:KAI) was in 10 hedge funds’ portfolio at the end of March. KAI has seen an increase in activity from the world’s largest hedge funds recently. There were 8 hedge funds in our database with KAI positions at the end of the previous quarter.

To most shareholders, hedge funds are seen as underperforming, outdated financial tools of years past. While there are greater than 8000 funds in operation at the moment, we hone in on the masters of this group, close to 450 funds. It is widely believed that this group controls the lion’s share of all hedge funds’ total capital, and by monitoring their top equity investments, we have spotted a number of investment strategies that have historically outperformed Mr. Market. 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 23.3 percentage points in 8 months (explore the details and some picks here).

Just as beneficial, positive insider trading sentiment is another way to parse down the stock market universe. Just as you’d expect, there are lots of stimuli for an insider to cut shares of his or her company, but only one, very obvious reason why they would buy. Many empirical studies have demonstrated the useful potential of this method if shareholders understand where to look (learn more here).

Keeping this in mind, it’s important to take a gander at the latest action encompassing Kadant Inc. (NYSE:KAI).

What does the smart money think about Kadant Inc. (NYSE:KAI)?

At Q1’s end, a total of 10 of the hedge funds we track held long positions in this stock, a change of 25% from the first quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully.

Kadant Inc. (NYSE:KAI)When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the largest position in Kadant Inc. (NYSE:KAI), worth close to $12.3 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Algert Coldiron Investors, managed by Peter Algert and Kevin Coldiron, which held a $2 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds with similar optimism include Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors.

As aggregate interest increased, some big names have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the largest position in Kadant Inc. (NYSE:KAI). Two Sigma Advisors had 0.5 million invested in the company at the end of the quarter. Ken Gray and Steve Walsh’s Bryn Mawr Capital also initiated a $0.4 million position during the quarter. The only other fund with a brand new KAI position is Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners.

What do corporate executives and insiders think about Kadant Inc. (NYSE:KAI)?

Bullish insider trading is most useful when the primary stock in question has seen transactions within the past half-year. Over the latest 180-day time frame, Kadant Inc. (NYSE:KAI) has seen zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Kadant Inc. (NYSE:KAI). These stocks are Flow International Corporation (NASDAQ:FLOW), Ampco-Pittsburgh Corp. (NYSE:AP), Global Power Equipment Group Inc (NASDAQ:GLPW), and Twin Disc, Incorporated (NASDAQ:TWIN). This group of stocks belong to the diversified machinery industry and their market caps resemble KAI’s market cap.

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