Is Advance Auto Parts, Inc. (NYSE:AAP) a superb investment right now? The smart money is selling. The number of bullish hedge fund bets went down by 1 lately.
To the average investor, there are many gauges market participants can use to track publicly traded companies. A pair of the most innovative are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace the broader indices by a very impressive margin (see just how much).
Just as important, optimistic insider trading activity is a second way to break down the stock market universe. Just as you'd expect, there are many motivations for an upper level exec to drop shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various empirical studies have demonstrated the valuable potential of this strategy if you understand where to look (learn more here).
With these "truths" under our belt, it's important to take a look at the latest action surrounding Advance Auto Parts, Inc. (NYSE:AAP).
At the end of the first quarter, a total of 38 of the hedge funds we track held long positions in this stock, a change of -3% from one quarter earlier. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes meaningfully.
According to our comprehensive database, Ricky Sandler's Eminence Capital had the most valuable position in Advance Auto Parts, Inc. (NYSE:AAP), worth close to $214.9 million, comprising 5.6% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which held a $105.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include Glenn Russell Dubin's Highbridge Capital Management, Frank Brosens's Taconic Capital and Richard Perry's Perry Capital.
Because Advance Auto Parts, Inc. (NYSE:AAP) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers that elected to cut their positions entirely last quarter. Interestingly, Jason Capello's Merchants' Gate Capital said goodbye to the biggest stake of the 450+ funds we key on, comprising an estimated $123.8 million in stock.. James Dinan's fund, York Capital Management, also cut its stock, about $76.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.
Bullish insider trading is best served when the company in focus has experienced transactions within the past 180 days. Over the latest half-year time frame, Advance Auto Parts, Inc. (NYSE:AAP) has experienced zero unique insiders buying, and 12 insider sales (see the details of insider trades here).
Let's check out hedge fund and insider activity in other stocks similar to Advance Auto Parts, Inc. (NYSE:AAP). These stocks are U.S. Auto Parts Network, Inc. (NASDAQ:PRTS), The Pep Boys - Manny, Moe & Jack (NYSE:PBY), AutoZone, Inc. (NYSE:AZO), , and O'Reilly Automotive Inc (NASDAQ:ORLY). This group of stocks are the members of the auto parts stores industry and their market caps resemble AAP's market cap.