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Hedge Funds Are Dumping Franklin Electric Co. (FELE)

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Franklin Electric Co. (NASDAQ:FELE) was in 7 hedge funds’ portfolio at the end of the fourth quarter of 2012. FELE shareholders have witnessed a decrease in support from the world’s most elite money managers of late. There were 7 hedge funds in our database with FELE positions at the end of the previous quarter.

Mario Gabelli

To most investors, hedge funds are seen as unimportant, old investment tools of years past. While there are over 8000 funds trading today, we choose to focus on the bigwigs of this club, close to 450 funds. Most estimates calculate that this group has its hands on the majority of the hedge fund industry’s total asset base, and by tracking their top stock picks, we have formulated a number of investment strategies that have historically outpaced the 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 started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Just as key, optimistic insider trading sentiment is a second way to parse down the world of equities. Obviously, there are many motivations for a corporate insider to cut shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the useful potential of this strategy if “monkeys” know what to do (learn more here).

Consequently, we’re going to take a look at the key action surrounding Franklin Electric Co. (NASDAQ:FELE).

What does the smart money think about Franklin Electric Co. (NASDAQ:FELE)?

In preparation for this year, a total of 7 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably.

Of the funds we track, Royce & Associates, managed by Chuck Royce, holds the largest position in Franklin Electric Co. (NASDAQ:FELE). Royce & Associates has a $67.9 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $30.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Mario Gabelli’s GAMCO Investors, Cliff Asness’s AQR Capital Management and Phil Frohlich’s Prescott Group Capital Management.

Because Franklin Electric Co. (NASDAQ:FELE) has witnessed falling interest from the aggregate hedge fund industry, we can see that there is a sect of hedgies that elected to cut their full holdings at the end of the year. Intriguingly, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC said goodbye to the largest position of the 450+ funds we monitor, worth about $29.7 million in stock., and Robert Joseph Caruso of Select Equity Group was right behind this move, as the fund dumped about $10.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with Franklin Electric Co. (NASDAQ:FELE)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in focus has seen transactions within the past half-year. Over the last 180-day time frame, Franklin Electric Co. (NASDAQ:FELE) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Franklin Electric Co. (NASDAQ:FELE). These stocks are Belden Inc. (NYSE:BDC), EnerSys (NYSE:ENS), OSI Systems, Inc. (NASDAQ:OSIS), General Cable Corporation (NYSE:BGC), and Littelfuse, Inc. (NASDAQ:LFUS). This group of stocks belong to the industrial electrical equipment industry and their market caps are similar to FELE’s market cap.

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