Is rue21, inc. (NASDAQ:RUE) the right investment to pursue these days? Investors who are in the know are taking a bearish view. The number of bullish hedge fund bets shrunk by 2 lately.
To the average investor, there are a multitude of indicators shareholders can use to watch Mr. Market. Two of the most under-the-radar are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the elite fund managers can outclass the broader indices by a healthy margin (see just how much).
Equally as key, positive insider trading sentiment is a second way to break down the marketplace. Just as you'd expect, 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 initiate a purchase. Many empirical studies have demonstrated the valuable potential of this tactic if shareholders understand where to look (learn more here).
With all of this in mind, let's take a look at the key action surrounding rue21, inc. (NASDAQ:RUE).
Heading into 2013, a total of 5 of the hedge funds we track were long in this stock, a change of -29% from the third quarter. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings considerably.
Of the funds we track, Steven Cohen's SAC Capital Advisors had the biggest position in rue21, inc. (NASDAQ:RUE), worth close to $7.1 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Gotham Asset Management, managed by Joel Greenblatt, which held a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedgies that are bullish include Paul Tudor Jones's Tudor Investment Corp, Jim Simons's Renaissance Technologies and D. E. Shaw's D E Shaw.
Due to the fact that rue21, inc. (NASDAQ:RUE) has faced falling interest from the smart money, logic holds that there lies a certain "tier" of hedgies that elected to cut their positions entirely at the end of the year. At the top of the heap, Jeffrey Vinik's Vinik Asset Management dumped the biggest investment of all the hedgies we key on, comprising an estimated $1.6 million in stock.. Ken Griffin's fund, Citadel Investment Group, also cut its call options., about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds at the end of the year.
Insider buying is at its handiest when the company in focus has experienced transactions within the past six months. Over the latest six-month time period, rue21, inc. (NASDAQ:RUE) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).
Let's also review hedge fund and insider activity in other stocks similar to rue21, inc. (NASDAQ:RUE). These stocks are Children's Place Retail Stores, Inc. (NASDAQ:PLCE), The Jones Group Inc. (NYSE:JNY), Hot Topic, Inc. (NASDAQ:HOTT), Stage Stores Inc (NYSE:SSI), and Cato Corp (NYSE:CATO). This group of stocks are the members of the apparel stores industry and their market caps are closest to RUE's market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Children's Place Retail Stores, Inc. (NASDAQ:PLCE)||18||1||3|
|The Jones Group Inc. (NYSE:JNY)||13||0||3|
|Hot Topic, Inc. (NASDAQ:HOTT)||12||0||2|
|Stage Stores Inc (NYSE:SSI)||15||0||4|
|Cato Corp (NYSE:CATO)||5||1||1|
With the results shown by the aforementioned research, everyday investors must always monitor hedge fund and insider trading sentiment, and rue21, inc. (NASDAQ:RUE) is an important part of this process.