Is Office Depot Inc (NYSE:ODP) a good investment today? Hedge funds are becoming less confident. The number of bullish hedge fund positions were trimmed by 1 lately.
According to most shareholders, hedge funds are perceived as slow, old financial vehicles of years past. While there are more than 8000 funds with their doors open today, we at Insider Monkey hone in on the top tier of this club, about 450 funds. It is widely believed that this group controls the majority of the hedge fund industry's total capital, and by paying attention to their best equity investments, we have unsheathed a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).
Equally as key, bullish insider trading activity is a second way to break down the stock market universe. There are lots of reasons for an executive to get rid of shares of his or her company, but just one, very clear reason why they would behave bullishly. Several academic studies have demonstrated the market-beating potential of this strategy if "monkeys" know where to look (learn more here).
Consequently, it's important to take a gander at the key action surrounding Office Depot Inc (NYSE:ODP).
In preparation for this year, a total of 15 of the hedge funds we track were bullish in this stock, a change of -6% from the previous quarter. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully.
When looking at the hedgies we track, Starboard Value LP, managed by Jeffrey Smith, holds the biggest position in Office Depot Inc (NYSE:ODP). Starboard Value LP has a $138 million position in the stock, comprising 15.7% of its 13F portfolio. Sitting at the No. 2 spot is HBK Investments, managed by David Costen Haley, which held a $5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds that are bullish include D. E. Shaw's D E Shaw, Israel Englander's Millennium Management and Boaz Weinstein's Saba Capital.
Because Office Depot Inc (NYSE:ODP) has faced a declination in interest from hedge fund managers, logic holds that there is a sect of fund managers who sold off their entire stakes at the end of the year. It's worth mentioning that Charles Davidson's Wexford Capital sold off the largest position of the 450+ funds we watch, valued at about $5 million in stock., and Francis Chou of Chou Associates Management was right behind this move, as the fund cut about $3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds at the end of the year.
Insider purchases made by high-level executives is at its handiest when the primary stock in question has experienced transactions within the past six months. Over the last six-month time period, Office Depot Inc (NYSE:ODP) has seen 2 unique insiders buying, and zero insider sales (see the details of insider trades here).
With the results exhibited by our strategies, retail investors should always watch hedge fund and insider trading sentiment, and Office Depot Inc (NYSE:ODP) is an important part of this process.
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.