Farmer Brothers Co. (NASDAQ:FARM) was in 8 hedge funds' portfolio at the end of March. FARM has seen a decrease in support from the world's most elite money managers of late. There were 8 hedge funds in our database with FARM holdings at the end of the previous quarter.
If you'd ask most shareholders, hedge funds are seen as slow, old investment tools of the past. While there are greater than 8000 funds trading today, we at Insider Monkey look at the top tier of this club, about 450 funds. It is estimated that this group controls the lion's share of the hedge fund industry's total capital, and by paying attention to their highest performing investments, we have come up with a few investment strategies that have historically outpaced 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 23.3 percentage points in 8 months (explore the details and some picks here).
Just as beneficial, positive insider trading activity is a second way to break down the marketplace. There are lots of incentives for an executive to cut shares of his or her company, but only one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the impressive potential of this method if piggybackers know where to look (learn more here).
With these "truths" under our belt, let's take a glance at the recent action encompassing Farmer Brothers Co. (NASDAQ:FARM).
Heading into Q2, a total of 8 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes meaningfully.
When looking at the hedgies we track, Chuck Royce's Royce & Associates had the largest position in Farmer Brothers Co. (NASDAQ:FARM), worth close to $8.7 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Michael Price of MFP Investors, with a $5.4 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other hedgies that are bullish include Jim Simons's Renaissance Technologies, Mark Broach's Manatuck Hill Partners and Israel Englander's Millennium Management.
Because Farmer Brothers Co. (NASDAQ:FARM) has experienced falling interest from hedge fund managers, we can see that there lies a certain "tier" of fund managers who were dropping their entire stakes last quarter. Intriguingly, Joseph A. Jolson's Harvest Capital Strategies said goodbye to the largest stake of all the hedgies we watch, comprising an estimated $1.4 million in stock. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Insider trading activity, especially when it's bullish, is at its handiest when the company in focus has seen transactions within the past six months. Over the latest 180-day time period, Farmer Brothers Co. (NASDAQ:FARM) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).
With the results exhibited by the aforementioned strategies, everyday investors should always pay attention to hedge fund and insider trading sentiment, and Farmer Brothers Co. (NASDAQ:FARM) shareholders fit into this picture quite nicely.