Sears Holdings Corporation (NASDAQ:SHLD) has been an awful investment over the past few months. Do a couple metrics suggest a turnaround? We'll see.
In today’s marketplace, there are a multitude of gauges investors can use to analyze Mr. Market. A couple of the most underrated are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce their index-focused peers by a very impressive margin (see just how much).
Equally as necessary, bullish insider trading sentiment is another way to analyze the stock market universe. There are a variety of motivations for a corporate insider to sell shares of his or her company, but only one, very clear reason why they would buy. Several academic studies have demonstrated the useful potential of this method if you know what to do (learn more here).
What's more, let's study the latest info surrounding Sears Holdings Corporation (NASDAQ:SHLD).
Heading into Q3, a total of 19 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedgies' capital changing hands, there exists a few key hedge fund managers who were upping their holdings meaningfully.
Out of the hedge funds we follow, Edward Lampert's ESL Investments had the largest position in Sears Holdings Corporation (NASDAQ:SHLD), worth close to $1.4247 billion, comprising 47.7% of its total 13F portfolio. Sitting at the No. 2 spot is Fairholme (FAIRX), managed by Bruce Berkowitz, which held a $858.1 million position; 11.2% of its 13F portfolio is allocated to the stock. Remaining hedgies with similar optimism include Robert Jaffe's Force Capital, Murray Stahl's Horizon Asset Management and Debra Fine's Fine Capital Partners.
Because Sears Holdings Corporation (NASDAQ:SHLD) has witnessed dropping sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of money managers who sold off their positions entirely at the end of the second quarter. At the top of the heap, Sean Cullinan's Point State Capital dumped the largest stake of the "upper crust" of funds we key on, totaling close to $5.9 million in stock, and Ward Davis of Caerus Global Investors was right behind this move, as the fund said goodbye to about $0.6 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Bullish insider trading is most useful when the company we're looking at has seen transactions within the past six months. Over the latest 180-day time period, Sears Holdings Corporation (NASDAQ:SHLD) has experienced 1 unique insiders buying, and 1 insider sales (see the details of insider trades here).
We'll also review the relationship between both of these indicators in other stocks similar to Sears Holdings Corporation (NASDAQ:SHLD). These stocks are Macy's, Inc. (NYSE:M), Saks Inc (NYSE:SKS), Kohl's Corporation (NYSE:KSS), J.C. Penney Company, Inc. (NYSE:JCP), and Dillard's, Inc. (NYSE:DDS). This group of stocks are the members of the department stores industry and their market caps resemble SHLD's market cap.