Smith & Wesson Holding Corporation (NASDAQ:SWHC) shareholders have witnessed a decrease in hedge fund interest lately.
In the eyes of most market participants, hedge funds are viewed as unimportant, outdated investment vehicles of years past. While there are over 8000 funds in operation at the moment, we choose to focus on the moguls of this group, around 450 funds. Most estimates calculate that this group controls the lion's share of all hedge funds' total capital, and by keeping an eye on their highest performing investments, we have revealed a few investment strategies that have historically outstripped the broader indices. 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 began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).
Just as important, positive insider trading sentiment is another way to parse down the world of equities. Just as you'd expect, there are lots of incentives for an upper level exec to sell shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this strategy if shareholders understand where to look (learn more here).
Keeping this in mind, we're going to take a look at the key action regarding Smith & Wesson Holding Corporation (NASDAQ:SWHC).
At the end of the fourth quarter, a total of 14 of the hedge funds we track held long positions in this stock, a change of -13% from the third quarter. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully.
Of the funds we track, Owl Creek Asset Management, managed by Jeffrey Altman, holds the most valuable position in Smith & Wesson Holding Corporation (NASDAQ:SWHC). Owl Creek Asset Management has a $14 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Jim Simons of Renaissance Technologies, with a $8 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Cliff Asness's AQR Capital Management, Robert Bishop's Impala Asset Management and Joel Greenblatt's Gotham Asset Management.
Due to the fact that Smith & Wesson Holding Corporation (NASDAQ:SWHC) has witnessed bearish sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of money managers that slashed their positions entirely heading into 2013. Interestingly, William Duhamel's Route One Investment Company sold off the biggest position of the "upper crust" of funds we watch, worth an estimated $14 million in stock.. Michael Johnston's fund, Steelhead Partners, also dropped its stock, about $14 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds heading into 2013.
Insider trading activity, especially when it's bullish, is most useful when the company in focus has experienced transactions within the past half-year. Over the latest six-month time period, Smith & Wesson Holding Corporation (NASDAQ:SWHC) has experienced 1 unique insiders purchasing, and 4 insider sales (see the details of insider trades here).
With the returns demonstrated by our research, retail investors should always watch hedge fund and insider trading sentiment, and Smith & Wesson Holding Corporation (NASDAQ:SWHC) shareholders fit into this picture quite nicely.
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