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Is NewMarket Corporation (NYSE:NEU) Going to Burn These Hedge Funds? – PolyOne Corporation (NYSE:POL), Rockwood Holdings, Inc. (NYSE:ROC)

Is NewMarket Corporation (NYSE:NEU) a good investment now? Money managers are betting on the stock. The number of long hedge fund bets improved by 1 in recent months.

NewMarket Corporation (NYSE:NEU)

To most market participants, hedge funds are assumed to be slow, outdated financial tools of yesteryear. While there are over 8000 funds in operation at present, we look at the crème de la crème of this group, about 450 funds. It is estimated that this group oversees the majority of all hedge funds’ total asset base, and by keeping an eye on their best picks, we have come up with a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped 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 outperformed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Just as integral, positive insider trading sentiment is another way to parse down the stock market universe. As the old adage goes: there are a number of stimuli for a corporate insider to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this method if you know what to do (learn more here).

Consequently, let’s take a look at the recent action surrounding NewMarket Corporation (NYSE:NEU).

How have hedgies been trading NewMarket Corporation (NYSE:NEU)?

Heading into 2013, a total of 13 of the hedge funds we track were long in this stock, a change of 8% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially.

Of the funds we track, D. E. Shaw’s D E Shaw had the largest position in NewMarket Corporation (NYSE:NEU), worth close to $56 million, accounting for 0.1% of its total 13F portfolio. Coming in second is GAMCO Investors, managed by Mario Gabelli, which held a $18 million position; 0% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Israel Englander’s Millennium Management, David Costen Haley’s HBK Investments and Chuck Royce’s Royce & Associates.

Consequently, some big names were leading the bulls’ herd. HBK Investments, managed by David Costen Haley, established the most valuable position in NewMarket Corporation (NYSE:NEU). HBK Investments had 2 million invested in the company at the end of the quarter. Ken Gray and Steve Walsh’s Bryn Mawr Capital also initiated a $0 million position during the quarter. The other funds with brand new NEU positions are Steven Cohen’s SAC Capital Advisors and Mike Vranos’s Ellington.

How are insiders trading NewMarket Corporation (NYSE:NEU)?

Bullish insider trading is at its handiest when the company in question has seen transactions within the past six months. Over the latest half-year time frame, NewMarket Corporation (NYSE:NEU) has seen 2 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to NewMarket Corporation (NYSE:NEU). These stocks are Rockwood Holdings, Inc. (NYSE:ROC), PolyOne Corporation (NYSE:POL), RPM International Inc. (NYSE:RPM), Methanex Corporation (USA) (NASDAQ:MEOH), and Cytec Industries Inc (NYSE:CYT). This group of stocks belong to the specialty chemicals industry and their market caps are closest to NEU’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Rockwood Holdings, Inc. (NYSE:ROC) 31 0 4
PolyOne Corporation (NYSE:POL) 11 0 8
RPM International Inc. (NYSE:RPM) 14 0 4
Methanex Corporation (USA) (NASDAQ:MEOH) 13 0 0
Cytec Industries Inc (NYSE:CYT) 18 0 14

With the results shown by Insider Monkey’s time-tested strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and NewMarket Corporation (NYSE:NEU) is no exception.

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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