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Hedge Funds Are Dumping Babcock & Wilcox Co (BWC)

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In the eyes of many traders, hedge funds are perceived as delayed, outdated investment tools of an era lost to time. Although there are over 8,000 hedge funds with their doors open in present day, Insider Monkey focuses on the aristocrats of this group, close to 525 funds. Analysts calculate that this group controls the majority of the hedge fund industry’s total capital, and by watching their highest performing equity investments, we’ve brought to light a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per 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 trumped the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as useful, bullish insider trading sentiment is another way to analyze the stock market universe. As the old adage goes: there are a number of reasons for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of academic studies have demonstrated the valuable potential of this strategy if you understand where to look (learn more here).

What’s more, it’s important to analyze the recent info about Babcock & Wilcox Co (NYSE:BWC).

How have hedgies been trading Babcock & Wilcox Co (NYSE:BWC)?

At the end of the second quarter, a total of 23 of the hedge funds we track held long positions in this stock, a change of -15% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings substantially.

Babcock & Wilcox Co (NYSE:BWC)When using filings from the hedgies we track, Kenneth Mario Garschina’s Mason Capital Management had the most valuable position in Babcock & Wilcox Co (NYSE:BWC), worth close to $357.2 million, comprising 7.1% of its total 13F portfolio. Coming in second is Glenview Capital, managed by Larry Robbins, which held a $166 million position; 1.5% of its 13F portfolio is allocated to the company. Remaining hedge funds with similar optimism include David Einhorn’s Greenlight Capital, Michael Blitzer’s Kingstown Capital Management and D. E. Shaw’s D E Shaw.

Because Babcock & Wilcox Co (NYSE:BWC) has faced dropping sentiment from upper-tier hedge fund managers, it’s safe to say that there lies a certain “tier” of hedge funds that decided to sell off their full holdings last quarter. Interestingly, Glenn Russell Dubin’s Highbridge Capital Management dumped the biggest position of all the hedgies we watch, comprising about $4.8 million in stock, and Neil Chriss of Hutchin Hill Capital was right behind this move, as the fund dropped about $4.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds last quarter.

How are insiders trading Babcock & Wilcox Co (NYSE:BWC)?

Insider buying made by high-level executives is particularly usable when the company we’re looking at has experienced transactions within the past six months. Over the latest half-year time period, Babcock & Wilcox Co (NYSE:BWC) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to Babcock & Wilcox Co (NYSE:BWC). These stocks are The Middleby Corporation (NASDAQ:MIDD), 3D Systems Corporation (NYSE:DDD), Graco Inc. (NYSE:GGG), Lennox International Inc. (NYSE:LII), and Crane Co. (NYSE:CR). This group of stocks are the members of the diversified machinery industry and their market caps are closest to BWC’s market cap.

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