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Should You Buy Federal Signal Corporation (FSS)?

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Federal Signal Corporation (NYSE:FSS) was in 16 hedge funds’ portfolio at the end of the first quarter of 2013. FSS shareholders have witnessed an increase in enthusiasm from smart money lately. There were 10 hedge funds in our database with FSS positions at the end of the previous quarter.

Chuck Royce

To the average investor, there are a multitude of metrics market participants can use to watch the equity markets. A couple of the most useful are hedge fund and insider trading sentiment. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the top fund managers can outclass their index-focused peers by a healthy margin (see just how much).

Equally as beneficial, optimistic insider trading sentiment is another way to break down the financial markets. As the old adage goes: there are plenty of stimuli for a corporate insider to downsize shares of his or her company, but just one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the market-beating potential of this strategy if piggybackers understand where to look (learn more here).

With these “truths” under our belt, let’s take a gander at the key action regarding Federal Signal Corporation (NYSE:FSS).

Hedge fund activity in Federal Signal Corporation (NYSE:FSS)

Heading into Q2, a total of 16 of the hedge funds we track held long positions in this stock, a change of 60% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially.

Of the funds we track, Nelson Obus’s Wynnefield Capital had the largest position in Federal Signal Corporation (NYSE:FSS), worth close to $20.3 million, accounting for 6.9% of its total 13F portfolio. On Wynnefield Capital’s heels is Royce & Associates, managed by Chuck Royce, which held a $15.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Mario Gabelli’s GAMCO Investors, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Gotham Asset Management, managed by Joel Greenblatt, assembled the most outsized position in Federal Signal Corporation (NYSE:FSS). Gotham Asset Management had 1.1 million invested in the company at the end of the quarter. Neil Chriss’s Hutchin Hill Capital also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new FSS investors: Mike Vranos’s Ellington, Glenn Russell Dubin’s Highbridge Capital Management, and David Costen Haley’s HBK Investments.

How are insiders trading Federal Signal Corporation (NYSE:FSS)?

Bullish insider trading is particularly usable when the company in question has experienced transactions within the past half-year. Over the latest 180-day time frame, Federal Signal Corporation (NYSE:FSS) has seen 1 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Federal Signal Corporation (NYSE:FSS). These stocks are Polaris Industries Inc. (NYSE:PII), Thor Industries, Inc. (NYSE:THO), Drew Industries, Inc. (NYSE:DW), Winnebago Industries, Inc. (NYSE:WGO), and Arctic Cat Inc (NASDAQ:ACAT). This group of stocks belong to the recreational vehicles industry and their market caps are similar to FSS’s market cap.

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