In the eyes of most traders, hedge funds are perceived as worthless, outdated financial tools of years past. While there are over 8000 funds with their doors open at the moment, we choose to focus on the top tier of this group, around 450 funds. It is widely believed that this group oversees most of the smart money’s total capital, and by watching their highest performing investments, we have identified a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per 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 24 percentage points in 7 months (explore the details and some picks here).
Just as integral, optimistic insider trading sentiment is another way to break down the marketplace. Just as you’d expect, there are a variety of reasons for a bullish insider to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this tactic if “monkeys” know where to look (learn more here).
Consequently, we’re going to take a peek at the recent action regarding Zep, Inc. (NYSE:ZEP).
How have hedgies been trading Zep, Inc. (NYSE:ZEP)?
At the end of the fourth quarter, a total of 7 of the hedge funds we track were long in this stock, a change of 133% from the previous quarter. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly.
According to our comprehensive database, Mario Gabelli’s GAMCO Investors had the largest position in Zep, Inc. (NYSE:ZEP), worth close to $40.6 million, accounting for 0.3% of its total 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which held a $1.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Ken Gray and Steve Walsh’s Bryn Mawr Capital and Andy Redleaf’s Whitebox Advisors.
As industrywide interest jumped, specific money managers have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, created the most valuable position in Zep, Inc. (NYSE:ZEP). Renaissance Technologies had 0.7 million invested in the company at the end of the quarter. Ken Gray and Steve Walsh’s Bryn Mawr Capital also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.
How are insiders trading Zep, Inc. (NYSE:ZEP)?
Insider trading activity, especially when it’s bullish, is best served when the company in question has experienced transactions within the past half-year. Over the last 180-day time frame, Zep, Inc. (NYSE:ZEP) has seen zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to Zep, Inc. (NYSE:ZEP). These stocks are Ecolab Inc. (NYSE:ECL), Church & Dwight Co., Inc. (NYSE:CHD) and Stepan Company (NYSE:SCL). This group of stocks are in the cleaning products industry and their market caps are closest to ZEP’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Ecolab Inc. (NYSE:ECL) | 22 | 0 | 4 |
| Church & Dwight Co., Inc. (NYSE:CHD) | 11 | 1 | 6 |
| Stepan Company (NYSE:SCL) | 6 | 1 | 5 |
With the results shown by the aforementioned tactics, everyday investors must always keep an eye on hedge fund and insider trading activity, and Zep, Inc. (NYSE:ZEP) is no exception.
