Is Mueller Industries, Inc. (NYSE:MLI) a first-rate investment today? Hedge funds are taking an optimistic view. The number of bullish hedge fund bets went up by 4 in recent months.
According to most shareholders, hedge funds are perceived as underperforming, outdated investment vehicles of yesteryear. While there are over 8000 funds in operation today, we at Insider Monkey look at the aristocrats of this group, about 450 funds. It is estimated that this group has its hands on the majority of the hedge fund industry's total capital, and by monitoring their top picks, we have unsheathed a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).
Equally as important, optimistic insider trading activity is another way to break down the world of equities. There are a variety of incentives for an upper level exec to downsize shares of his or her company, but just one, very obvious reason why they would buy. Plenty of empirical studies have demonstrated the useful potential of this method if investors know where to look (learn more here).
Now, we're going to take a peek at the recent action regarding Mueller Industries, Inc. (NYSE:MLI).
At the end of the fourth quarter, a total of 21 of the hedge funds we track held long positions in this stock, a change of 24% from one quarter earlier. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes meaningfully.
When looking at the hedgies we track, Jeffrey Gates's Gates Capital Management had the most valuable position in Mueller Industries, Inc. (NYSE:MLI), worth close to $52 million, comprising 3.2% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $37 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Chuck Royce's Royce & Associates, David Cohen and Harold Levy's Iridian Asset Management and Mario Gabelli's GAMCO Investors.
Now, key money managers were breaking ground themselves. Kingdon Capital, managed by Mark Kingdon, created the biggest position in Mueller Industries, Inc. (NYSE:MLI). Kingdon Capital had 10 million invested in the company at the end of the quarter. Michael Lowenstein's Kensico Capital also made a $4 million investment in the stock during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin's Highbridge Capital Management, Robert Bishop's Impala Asset Management, and David Costen Haley's HBK Investments.
Insider buying is most useful when the company in focus has seen transactions within the past 180 days. Over the last 180-day time frame, Mueller Industries, Inc. (NYSE:MLI) has seen 1 unique insiders purchasing, and 7 insider sales (see the details of insider trades here).
With the returns demonstrated by the aforementioned studies, retail investors must always keep an eye on hedge fund and insider trading sentiment, and Mueller Industries, Inc. (NYSE:MLI) applies perfectly to this mantra.
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.