Lufkin Industries, Inc. (LUFK): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

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Lufkin Industries, Inc. (NASDAQ:LUFK) was in 13 hedge funds’ portfolio at the end of the first quarter of 2013. LUFK investors should be aware of an increase in enthusiasm from smart money of late. There were 10 hedge funds in our database with LUFK positions at the end of the previous quarter.

Lufkin Industries, Inc. (NASDAQ:LUFK)

At the moment, there are many metrics market participants can use to monitor Mr. Market. A duo of the most under-the-radar are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the best hedge fund managers can beat the market by a healthy amount (see just how much).

Just as important, bullish insider trading sentiment is another way to parse down the financial markets. There are a variety of motivations for an insider to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the useful potential of this tactic if “monkeys” know where to look (learn more here).

Consequently, let’s take a peek at the recent action surrounding Lufkin Industries, Inc. (NASDAQ:LUFK).

How are hedge funds trading Lufkin Industries, Inc. (NASDAQ:LUFK)?

In preparation for this quarter, a total of 13 of the hedge funds we track held long positions in this stock, a change of 30% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully.

When looking at the hedgies we track, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Lufkin Industries, Inc. (NASDAQ:LUFK). GAMCO Investors has a $38.4 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Peconic Partners LLC, managed by William Harnisch, which held a $28.9 million position; 4.5% of its 13F portfolio is allocated to the stock. Other hedge funds with similar optimism include Israel Englander’s Millennium Management, Chuck Royce’s Royce & Associates and Phill Gross and Robert Atchinson’s Adage Capital Management.

Consequently, key hedge funds were breaking ground themselves. Peconic Partners LLC, managed by William Harnisch, assembled the largest position in Lufkin Industries, Inc. (NASDAQ:LUFK). Peconic Partners LLC had 28.9 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $8.8 million position during the quarter. The other funds with brand new LUFK positions are Brian Taylor’s Pine River Capital Management, Arvind Sanger’s GeoSphere Capital Management, and J. Alan Reid, Jr.’s Forward Management.

How are insiders trading Lufkin Industries, Inc. (NASDAQ:LUFK)?

Insider purchases made by high-level executives is best served when the primary stock in question has seen transactions within the past six months. Over the last half-year time period, Lufkin Industries, Inc. (NASDAQ:LUFK) has experienced zero unique insiders buying, and 2 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 Lufkin Industries, Inc. (NASDAQ:LUFK). These stocks are Forum Energy Technologies Inc (NYSE:FET), Precision Drilling Corp (USA) (NYSE:PDS), Helix Energy Solutions Group Inc. (NYSE:HLX), CARBO Ceramics Inc. (NYSE:CRR), and Energy XXI (Bermuda) Limited (NASDAQ:EXXI). This group of stocks are in the oil & gas equipment & services industry and their market caps match LUFK’s market cap.

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