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Should You Avoid oFerro Corpration (NYSE:FOE)?

Ferro Corporation (NYSE:FOE)Ferro Corporation (NYSE:FOE) was in 17 hedge funds’ portfolio at the end of the fourth quarter of 2012. FOE has experienced a decrease in enthusiasm from smart money recently. There were 17 hedge funds in our database with FOE holdings at the end of the previous quarter.

If you’d ask most traders, hedge funds are assumed to be slow, old financial tools of yesteryear. While there are greater than 8000 funds trading today, we at Insider Monkey hone in on the moguls of this group, about 450 funds. It is widely believed that this group controls most of all hedge funds’ total asset base, and by tracking their best investments, we have uncovered a few investment strategies that have historically outpaced 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 topped the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Equally as integral, bullish insider trading sentiment is another way to break down the financial markets. Obviously, there are a variety of motivations for a bullish insider to cut shares of his or her company, but only one, very obvious reason why they would buy. Many academic studies have demonstrated the valuable potential of this tactic if piggybackers know what to do (learn more here).

Now, let’s take a gander at the key action surrounding Ferro Corporation (NYSE:FOE).

What does the smart money think about Ferro Corporation (NYSE:FOE)?

In preparation for this year, a total of 17 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully.

Of the funds we track, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Ferro Corporation (NYSE:FOE). GAMCO Investors has a $29 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which held a $11 million position; the fund has 0% of its 13F portfolio invested in the stock. Other hedge funds that are bullish include Don Morgan’s Brigade Capital, Ryan Schaper’s Point Lobos Capital and Jim Simons’s Renaissance Technologies.

Because Ferro Corporation (NYSE:FOE) has witnessed a declination in interest from the smart money, logic holds that there was a specific group of money managers that decided to sell off their entire stakes heading into 2013. At the top of the heap, Boaz Weinstein’s Saba Capital cut the largest position of all the hedgies we monitor, comprising close to $2 million in stock., and John Fichthorn of Dialectic Capital Management was right behind this move, as the fund dropped about $0 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with Ferro Corporation (NYSE:FOE)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in focus has experienced transactions within the past half-year. Over the latest six-month time frame, Ferro Corporation (NYSE:FOE) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the returns shown by our strategies, everyday investors should always monitor hedge fund and insider trading activity, and Ferro Corporation (NYSE:FOE) 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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