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Should You Avoid Cabot Corp (NYSE:CBT)? – PolyOne Corporation (NYSE:POL), Olin Corporation (NYSE:OLN)

Cabot Corp (NYSE:CBT) investors should pay attention to a decrease in hedge fund sentiment lately.

Cabot Corp (NYSE:CBT)

At the moment, there are many methods investors can use to analyze publicly traded companies. Some of the best are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the elite investment managers can outpace the S&P 500 by a solid margin (see just how much).

Equally as beneficial, bullish insider trading activity is another way to parse down the stock market universe. As the old adage goes: there are a number of reasons for an insider to get rid of 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 market-beating potential of this tactic if shareholders know where to look (learn more here).

Keeping this in mind, let’s take a peek at the recent action surrounding Cabot Corp (NYSE:CBT).

How are hedge funds trading Cabot Corp (NYSE:CBT)?

In preparation for this year, a total of 13 of the hedge funds we track held long positions in this stock, a change of -28% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings significantly.

According to our comprehensive database, Royce & Associates, managed by Chuck Royce, holds the largest position in Cabot Corp (NYSE:CBT). Royce & Associates has a $108 million position in the stock, comprising 0.4% of its 13F portfolio. On Royce & Associates’s heels is Thomas E. Claugus of GMT Capital, with a $81 million position; the fund has 2% of its 13F portfolio invested in the stock. Other hedgies that are bullish include David Dreman’s Dreman Value Management, Robert Bishop’s Impala Asset Management and Jim Simons’s Renaissance Technologies.

Because Cabot Corp (NYSE:CBT) has faced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers that decided to sell off their positions entirely heading into 2013. Intriguingly, Douglas Dillard Jr. and Raj D. Venkatesan’s Standard Pacific Capital sold off the largest stake of all the hedgies we monitor, worth an estimated $42 million in stock.. Joel Greenblatt’s fund, Gotham Asset Management, also cut its stock, about $2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds heading into 2013.

Insider trading activity in Cabot Corp (NYSE:CBT)

Bullish insider trading is particularly usable when the primary stock in question has experienced transactions within the past 180 days. Over the last half-year time frame, Cabot Corp (NYSE:CBT) has experienced zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Cabot Corp (NYSE:CBT). These stocks are Sensient Technologies Corporation (NYSE:SXT), PolyOne Corporation (NYSE:POL), HB Fuller Co (NYSE:FUL), Olin Corporation (NYSE:OLN), and Chemtura Corp (NYSE:CHMT). This group of stocks are the members of the specialty chemicals industry and their market caps are closest to CBT’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Sensient Technologies Corporation (NYSE:SXT) 10 0 4
PolyOne Corporation (NYSE:POL) 11 0 8
HB Fuller Co (NYSE:FUL) 9 1 4
Olin Corporation (NYSE:OLN) 14 1 4
Chemtura Corp (NYSE:CHMT) 25 2 0

With the returns exhibited by Insider Monkey’s research, retail investors should always monitor hedge fund and insider trading sentiment, and Cabot Corp (NYSE:CBT) is an important part of this process.

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

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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