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Hedge Funds Are Buying Lear Corporation (NYSE:LEA)

Lear Corporation (NYSE:LEA) investors should pay attention to an increase in enthusiasm from smart money recently.

To most market participants, hedge funds are assumed to be unimportant, outdated financial vehicles of years past. While there are greater than 8000 funds in operation today, we hone in on the bigwigs of this club, close to 450 funds. Most estimates calculate that this group oversees the majority of the smart money’s total asset base, and by watching their highest performing investments, we have come up with a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outperformed 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Lear Corporation (NYSE:LEA)

Just as key, positive insider trading sentiment is a second way to parse down the world of equities. As the old adage goes: there are lots of reasons for an executive to sell shares of his or her company, but just one, very clear reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this strategy if piggybackers understand what to do (learn more here).

Keeping this in mind, we’re going to take a look at the recent action regarding Lear Corporation (NYSE:LEA).

Hedge fund activity in Lear Corporation (NYSE:LEA)

At year’s end, a total of 37 of the hedge funds we track were bullish in this stock, a change of 12% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably.

According to our comprehensive database, David Gallo’s Valinor Management LLC had the most valuable position in Lear Corporation (NYSE:LEA), worth close to $138 million billion, comprising 5.9% of its total 13F portfolio. Sitting at the No. 2 spot is Richard McGuire of Marcato Capital Management, with a $128 million position; the fund has 16.6% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Ken Griffin’s Citadel Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and Doug Silverman’s Senator Investment Group.

Consequently, key money managers have been driving this bullishness. Marcato Capital Management, managed by Richard McGuire, assembled the most outsized position in Lear Corporation (NYSE:LEA). Marcato Capital Management had 128 million invested in the company at the end of the quarter. Doug Silverman’s Senator Investment Group also made a $70 million investment in the stock during the quarter. The other funds with new positions in the stock are James Dinan’s York Capital Management, and Debra Fine’s Fine Capital Partners.

Insider trading activity in Lear Corporation (NYSE:LEA)

Insider trading activity, especially when it’s bullish, is best served when the company we’re looking at has seen transactions within the past half-year. Over the last half-year time frame, Lear Corporation (NYSE:LEA) has seen zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

With the returns shown by our strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and Lear Corporation (NYSE:LEA) 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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