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Should You Avoid RPM International Inc. (NYSE:RPM)? – NewMarket Corporation (NYSE:NEU), The Valspar Corporation (NYSE:VAL)

RPM International Inc. (NYSE:RPM) was in 14 hedge funds’ portfolio at the end of the fourth quarter of 2012. RPM investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 14 hedge funds in our database with RPM holdings at the end of the previous quarter.

According to most traders, hedge funds are assumed to be worthless, old investment vehicles of the past. While there are greater than 8000 funds trading at present, we at Insider Monkey hone in on the moguls of this group, close to 450 funds. Most estimates calculate that this group oversees the majority of the smart money’s total asset base, and by monitoring their top stock picks, we have revealed a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year 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 outclassed the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

RPM International Inc. (NYSE:RPM)

Just as beneficial, positive insider trading activity is a second way to break down the investments you’re interested in. There are plenty of reasons for a corporate insider to cut shares of his or her company, but just one, very simple reason why they would buy. Plenty of academic studies have demonstrated the market-beating potential of this method if you know where to look (learn more here).

With these “truths” under our belt, we’re going to take a look at the key action surrounding RPM International Inc. (NYSE:RPM).

What have hedge funds been doing with RPM International Inc. (NYSE:RPM)?

In preparation for this year, a total of 14 of the hedge funds we track were bullish in this stock, a change of 0% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes considerably.

According to our comprehensive database, Renaissance Technologies, managed by Jim Simons, holds the largest position in RPM International Inc. (NYSE:RPM). Renaissance Technologies has a $21 million position in the stock, comprising 0.1% of its 13F portfolio. On Renaissance Technologies’s heels is Steven Cohen of SAC Capital Advisors, with a $15 million position; 0% of its 13F portfolio is allocated to the company. Remaining hedge funds that are bullish include D. E. Shaw’s D E Shaw, Phill Gross and Robert Atchinson’s Adage Capital Management and Israel Englander’s Millennium Management.

Because RPM International Inc. (NYSE:RPM) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers who were dropping their entire stakes at the end of the year. Interestingly, Ken Grossman and Glen Schneider’s SG Capital Management sold off the biggest stake of the “upper crust” of funds we key on, comprising about $7 million in stock., and Ken Griffin of Citadel Investment Group was right behind this move, as the fund sold off about $1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading RPM International Inc. (NYSE:RPM)?

Bullish insider trading is most useful when the company in focus has experienced transactions within the past six months. Over the last six-month time frame, RPM International Inc. (NYSE:RPM) has seen zero unique insiders buying, and 4 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to RPM International Inc. (NYSE:RPM). These stocks are Methanex Corporation (USA) (NASDAQ:MEOH), NewMarket Corporation (NYSE:NEU), Rockwood Holdings, Inc. (NYSE:ROC), Cytec Industries Inc (NYSE:CYT), and The Valspar Corporation (NYSE:VAL). This group of stocks belong to the specialty chemicals industry and their market caps are closest to RPM’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Methanex Corporation (USA) (NASDAQ:MEOH) 13 0 0
NewMarket Corporation (NYSE:NEU) 13 2 1
Rockwood Holdings, Inc. (NYSE:ROC) 31 0 4
Cytec Industries Inc (NYSE:CYT) 18 0 14
The Valspar Corporation (NYSE:VAL) 17 1 3

With the returns demonstrated by our time-tested strategies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and RPM International Inc. (NYSE:RPM) 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 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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