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Hexcel Corporation (NYSE:HXL): Insiders Are Dumping, Should You? – CAE, Inc. (USA) (NYSE:CAE), Spirit AeroSystems Holdings, Inc. (NYSE:SPR)

Hexcel Corporation (NYSE:HXL) has experienced an increase in hedge fund interest lately.

Hexcel Corporation (NYSE:HXL)

According to most traders, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are more than 8000 funds trading today, we hone in on the aristocrats of this group, close to 450 funds. Most estimates calculate that this group controls most of all hedge funds’ total asset base, and by monitoring their best equity investments, we have uncovered a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Just as beneficial, optimistic insider trading activity is a second way to break down the investments you’re interested in. There are plenty of incentives for a bullish insider to get rid of shares of his or her company, but only one, very clear reason why they would buy. Various empirical studies have demonstrated the valuable potential of this strategy if piggybackers understand what to do (learn more here).

Consequently, let’s take a look at the latest action encompassing Hexcel Corporation (NYSE:HXL).

How have hedgies been trading Hexcel Corporation (NYSE:HXL)?

Heading into 2013, a total of 13 of the hedge funds we track were bullish in this stock, a change of 30% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly.

When looking at the hedgies we track, Robert Karr’s Joho Capital had the most valuable position in Hexcel Corporation (NYSE:HXL), worth close to $36 million, comprising 4.8% of its total 13F portfolio. On Joho Capital’s heels is Chuck Royce of Royce & Associates, with a $15 million position; the fund has 0% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include Andrew Sandler’s Sandler Capital Management, Robert B. Gillam’s McKinley Capital Management and Ken Griffin’s Citadel Investment Group.

Now, key hedge funds were breaking ground themselves. Joho Capital, managed by Robert Karr, established the most outsized position in Hexcel Corporation (NYSE:HXL). Joho Capital had 36 million invested in the company at the end of the quarter. Andrew Sandler’s Sandler Capital Management also made a $9 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Israel Englander’s Catapult Capital Management, and John Burbank’s Passport Capital.

How have insiders been trading Hexcel Corporation (NYSE:HXL)?

Bullish insider trading is at its handiest when the company in focus has seen transactions within the past six months. Over the last half-year time frame, Hexcel Corporation (NYSE:HXL) has experienced zero unique insiders buying, and 5 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 Hexcel Corporation (NYSE:HXL). These stocks are Alliant Techsystems Inc. (NYSE:ATK), CAE, Inc. (USA) (NYSE:CAE), Huntington Ingalls Industries Inc (NYSE:HII), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), and Teledyne Technologies Incorporated (NYSE:TDY). This group of stocks are the members of the aerospace/defense products & services industry and their market caps match HXL’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Alliant Techsystems Inc. (NYSE:ATK) 20 0 1
CAE, Inc. (USA) (NYSE:CAE) 3 0 0
Huntington Ingalls Industries Inc (NYSE:HII) 21 0 4
Spirit AeroSystems Holdings, Inc. (NYSE:SPR) 25 0 0
Teledyne Technologies Incorporated (NYSE:TDY) 10 0 7

With the results exhibited by the aforementioned research, retail investors must always keep an eye on hedge fund and insider trading sentiment, and Hexcel Corporation (NYSE:HXL) is an important part of this process.

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

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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