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MWI Veterinary Supply, Inc. (NASDAQ:MWIV), Henry Schein, Inc.: Patterson Companies, Inc. (NASDAQ:PDCO): Hedge Funds and Insiders Are Bearish, What Should You Do?

Is Patterson Companies, Inc. (NASDAQ:PDCO) ready to raly soon? The smart money is reducing their bets on the stock. The number of bullish hedge fund bets retreated by 6 in recent months.

Patterson Companies, Inc. (NASDAQ:PDCO)If you’d ask most traders, hedge funds are viewed as unimportant, old financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, we at Insider Monkey hone in on the aristocrats of this group, close to 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total capital, and by keeping an eye on their best equity investments, we have come up with a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually 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 key, bullish insider trading sentiment is a second way to break down the world of equities. Just as you’d expect, there are many stimuli for a corporate insider to downsize shares of his or her company, but only one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the useful potential of this strategy if “monkeys” understand what to do (learn more here).

With all of this in mind, let’s take a look at the latest action encompassing Patterson Companies, Inc. (NASDAQ:PDCO).

What does the smart money think about Patterson Companies, Inc. (NASDAQ:PDCO)?

In preparation for this year, a total of 14 of the hedge funds we track were bullish in this stock, a change of -30% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings considerably.

Of the funds we track, Yacktman Asset Management, managed by Donald Yacktman, holds the biggest position in Patterson Companies, Inc. (NASDAQ:PDCO). Yacktman Asset Management has a $104 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is held by Mario Gabelli of GAMCO Investors, with a $49 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Cliff Asness’s AQR Capital Management, Robert Joseph Caruso’s Select Equity Group and David Harding’s Winton Capital Management.

Since Patterson Companies, Inc. (NASDAQ:PDCO) has faced a declination in interest from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers who were dropping their full holdings heading into 2013. It’s worth mentioning that Jim Simons’s Renaissance Technologies dumped the biggest investment of the 450+ funds we watch, totaling about $8 million in stock., and Andrew Sandler of Sandler Capital Management was right behind this move, as the fund dropped about $5 million worth. These moves are important to note, as total hedge fund interest was cut by 6 funds heading into 2013.

Insider trading activity in Patterson Companies, Inc. (NASDAQ:PDCO)

Insider purchases made by high-level executives is most useful when the company in focus has seen transactions within the past six months. Over the last 180-day time period, Patterson Companies, Inc. (NASDAQ:PDCO) has seen zero unique insiders buying, and 3 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Patterson Companies, Inc. (NASDAQ:PDCO). These stocks are Chindex International, Inc. (NASDAQ:CHDX), MWI Veterinary Supply, Inc. (NASDAQ:MWIV), Henry Schein, Inc. (NASDAQ:HSIC), and Owens & Minor, Inc. (NYSE:OMI). This group of stocks are in the medical equipment wholesale industry and their market caps match PDCO’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Chindex International, Inc. (NASDAQ:CHDX) 1 0 2
MWI Veterinary Supply, Inc. (NASDAQ:MWIV) 4 0 6
Henry Schein, Inc. (NASDAQ:HSIC) 16 0 15
Owens & Minor, Inc. (NYSE:OMI) 9 0 8

With the returns shown by our studies, retail investors should always monitor hedge fund and insider trading sentiment, and Patterson Companies, Inc. (NASDAQ:PDCO) is no exception.

Click here to learn why you should track hedge funds

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