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Ralcorp Holdings, Inc. (NYSE:RAH): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Ralcorp Holdings, Inc. (NYSE:RAH) was in 31 hedge funds’ portfolio at the end of the fourth quarter of 2012. RAH investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 27 hedge funds in our database with RAH holdings at the end of the previous quarter.

In the 21st century investor’s toolkit, there are plenty of metrics market participants can use to analyze publicly traded companies. A duo of the most underrated are hedge fund and insider trading sentiment. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the best money managers can beat their index-focused peers by a healthy amount (see just how much).

Equally as important, bullish insider trading sentiment is a second way to break down the marketplace. Obviously, there are a variety of motivations for an executive to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the valuable potential of this method if you understand where to look (learn more here).

With these “truths” under our belt, let’s take a glance at the key action surrounding Ralcorp Holdings, Inc. (NYSE:RAH).

How are hedge funds trading Ralcorp Holdings, Inc. (NYSE:RAH)?

Heading into 2013, a total of 31 of the hedge funds we track were long in this stock, a change of 15% from the third quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully.

When looking at the hedgies we track, HBK Investments, managed by David Costen Haley, holds the most valuable position in Ralcorp Holdings, Inc. (NYSE:RAH). HBK Investments has a $240 million position in the stock, comprising 4.7% of its 13F portfolio. The second largest stake is held by Robert Emil Zoellner of Alpine Associates, with a $215 million position; the fund has 8.8% of its 13F portfolio invested in the stock. Other peers with similar optimism include Matthew Halbower’s Pentwater Capital Management, John Paulson’s Paulson & Co and Thomas Lenox Kempner’s Davidson Kempner.

As industrywide interest jumped, key money managers have jumped into Ralcorp Holdings, Inc. (NYSE:RAH) headfirst. Alpine Associates, managed by Robert Emil Zoellner, assembled the largest position in Ralcorp Holdings, Inc. (NYSE:RAH). Alpine Associates had 215 million invested in the company at the end of the quarter. Matthew Halbower’s Pentwater Capital Management also made a $161 million investment in the stock during the quarter. The other funds with brand new RAH positions are Thomas Lenox Kempner’s Davidson Kempner, Jane Mendillo’s Harvard Management Co, and Clint Carlson’s Carlson Capital.

What do corporate executives and insiders think about Ralcorp Holdings, Inc. (NYSE:RAH)?

Insider purchases made by high-level executives is best served when the company we’re looking at has seen transactions within the past half-year. Over the last six-month time frame, Ralcorp Holdings, Inc. (NYSE:RAH) has experienced zero unique insiders purchasing, and 9 insider sales (see the details of insider trades here).

With the returns demonstrated by the aforementioned time-tested strategies, everyday investors should always monitor hedge fund and insider trading sentiment, and Ralcorp Holdings, Inc. (NYSE:RAH) shareholders fit into this picture quite nicely.

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

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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