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Hedge Funds Aren’t Crazy About Seagate Technology PLC (NASDAQ:STX) Anymore

Is Seagate Technology PLC (NASDAQ:STX) a bargain? Investors who are in the know are selling. The number of bullish hedge fund bets retreated by 8 in recent months.

In the eyes of most shareholders, hedge funds are perceived as slow, old investment vehicles of years past. While there are greater than 8000 funds trading at the moment, we look at the elite of this group, close to 450 funds. It is estimated that this group controls the majority of all hedge funds’ total capital, and by keeping an eye on their highest performing stock picks, we have formulated a number of investment strategies that have historically beaten the broader indices. 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 started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Just as important, optimistic insider trading sentiment is another way to parse down the financial markets. There are many reasons for an insider to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many empirical studies have demonstrated the useful potential of this strategy if piggybackers know what to do (learn more here).

Consequently, let’s take a look at the latest action encompassing Seagate Technology PLC (NASDAQ:STX).

What have hedge funds been doing with Seagate Technology PLC (NASDAQ:STX)?

At the end of the fourth quarter, a total of 22 of the hedge funds we track held long positions in this stock, a change of -27% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully.

When looking at the hedgies we track, Greenlight Capital, managed by David Einhorn, holds the biggest position in Seagate Technology PLC (NASDAQ:STX). Greenlight Capital has a $255 million position in the stock, comprising 4% of its 13F portfolio. On Greenlight Capital’s heels is David Cohen and Harold Levy of Iridian Asset Management, with a $96 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Jonathon Jacobson’s Highfields Capital Management, Jim Simons’s Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Judging by the fact that Seagate Technology PLC (NASDAQ:STX) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of money managers who were dropping their positions entirely last quarter. Interestingly, Anthony Bozza’s Lakewood Capital Management sold off the largest stake of all the hedgies we watch, worth close to $63 million in stock.. John Thaler’s fund, JAT Capital Management, also cut its stock, about $52 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds last quarter.

Insider trading activity in Seagate Technology PLC (NASDAQ:STX)

Bullish insider trading is at its handiest when the company in focus has seen transactions within the past 180 days. Over the latest six-month time frame, Seagate Technology PLC (NASDAQ:STX) has seen zero unique insiders buying, and 18 insider sales (see the details of insider trades here).

With the returns demonstrated by Insider Monkey’s research, retail investors must always monitor hedge fund and insider trading sentiment, and Seagate Technology PLC (NASDAQ:STX) applies perfectly to this mantra.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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