Sturm, Ruger & Company (NYSE:RGR) shareholders have witnessed a decrease in enthusiasm from smart money of late.
To most traders, hedge funds are viewed as slow, old financial tools of years past. While there are greater than 8000 funds in operation today, we choose to focus on the upper echelon of this group, close to 450 funds. It is estimated that this group has its hands on the majority of all hedge funds' total capital, and by paying attention to their best stock picks, we have uncovered a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Just as key, optimistic insider trading sentiment is another way to parse down the stock market universe. As the old adage goes: there are lots of motivations for a bullish insider to get rid of shares of his or her company, but only one, very clear reason why they would behave bullishly. Many empirical studies have demonstrated the market-beating potential of this tactic if piggybackers understand what to do (learn more here).
With these "truths" under our belt, it's important to take a gander at the recent action encompassing Sturm, Ruger & Company (NYSE:RGR).
At Q1's end, a total of 16 of the hedge funds we track held long positions in this stock, a change of -11% from one quarter earlier. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially.
Of the funds we track, Rob Butts and Josh Clark's Southpoint Capital Advisors had the biggest position in Sturm, Ruger & Company (NYSE:RGR), worth close to $15.4 million, comprising 1% of its total 13F portfolio. On Southpoint Capital Advisors's heels is Hound Partners, managed by Jonathan Auerbach, which held a $11.4 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other peers that are bullish include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Jim Simons's Renaissance Technologies and D. E. Shaw's D E Shaw.
Because Sturm, Ruger & Company (NYSE:RGR) has witnessed bearish sentiment from the smart money, we can see that there is a sect of hedgies who were dropping their positions entirely in Q1. It's worth mentioning that Chase Coleman and Feroz Dewan's Tiger Global Management LLC dumped the biggest investment of the 450+ funds we key on, valued at about $36.3 million in stock., and Robert Bishop of Impala Asset Management was right behind this move, as the fund dropped about $24.9 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds in Q1.
Insider trading activity, especially when it's bullish, is best served when the company we're looking at has seen transactions within the past six months. Over the latest 180-day time frame, Sturm, Ruger & Company (NYSE:RGR) has seen zero unique insiders purchasing, and 11 insider sales (see the details of insider trades here).
Let's also take a look at hedge fund and insider activity in other stocks similar to Sturm, Ruger & Company (NYSE:RGR). These stocks are Smith & Wesson Holding Corporation (NASDAQ:SWHC), AAR Corp. (NYSE:AIR), Kaman Corporation (NYSE:KAMN), and Orbital Sciences Corp (NYSE:ORB). All of these stocks are in the aerospace/defense products & services industry and their market caps are similar to RGR's market cap.