Staples, Inc. (NASDAQ:SPLS) has experienced a decrease in hedge fund interest in recent months.
According to most traders, hedge funds are assumed to be unimportant, outdated investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, we look at the crème de la crème of this club, close to 450 funds. It is estimated that this group controls most of the smart money's total capital, and by tracking their highest performing picks, we have identified a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).
Equally as integral, optimistic insider trading activity is another way to break down the financial markets. There are lots of incentives for an insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Several empirical studies have demonstrated the market-beating potential of this method if investors know where to look (learn more here).
With these "truths" under our belt, we're going to take a look at the recent action encompassing Staples, Inc. (NASDAQ:SPLS).
Heading into 2013, a total of 34 of the hedge funds we track held long positions in this stock, a change of -11% from the previous quarter. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully.
According to our comprehensive database, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Staples, Inc. (NASDAQ:SPLS). Pzena Investment Management has a $447 million position in the stock, comprising 3.7% of its 13F portfolio. Coming in second is International Value Advisers, managed by Charles de Vaulx, which held a $143 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Some other hedge funds that hold long positions include Russell Hawkins's Hawkins Capital, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Donald Yacktman's Yacktman Asset Management.
Because Staples, Inc. (NASDAQ:SPLS) has faced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedgies who were dropping their entire stakes last quarter. At the top of the heap, Peter Adam Hochfelder's Brahman Capital sold off the biggest stake of all the hedgies we track, comprising an estimated $37 million in call options. William B. Gray's fund, Orbis Investment Management, also said goodbye to its stock, about $31 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds last quarter.
Insider purchases made by high-level executives is most useful when the company in question has seen transactions within the past 180 days. Over the last half-year time period, Staples, Inc. (NASDAQ:SPLS) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
With the returns shown by the aforementioned strategies, retail investors should always monitor hedge fund and insider trading activity, and Staples, Inc. (NASDAQ:SPLS) applies perfectly to this mantra.
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.