Is Textron Inc. (NYSE:TXT) undervalued? Hedge funds are in a pessimistic mood. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience
If you'd ask most stock holders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are more than 8000 funds with their doors open at present, we choose to focus on the moguls of this club, about 450 funds. It is estimated that this group controls most of the smart money's total asset base, and by keeping an eye on their highest performing picks, we have uncovered 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 per annum 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 (explore the details and some picks here).
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With all of this in mind, we're going to take a peek at the recent action regarding Textron Inc. (NYSE:TXT).
At year's end, a total of 20 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially.
Of the funds we track, Mario Gabelli's GAMCO Investors had the most valuable position in Textron Inc. (NYSE:TXT), worth close to $25 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by ZWEIG DIMENNA PARTNERS, managed by Joe DiMenna, which held a $18 million position; 0.8% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish include Larry Foley and Paul Farrell's Bronson Point Partners, D. E. Shaw's D E Shaw and Israel Englander's Millennium Management.
Since Textron Inc. (NYSE:TXT) has witnessed falling interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedge funds who sold off their full holdings at the end of the year. It's worth mentioning that Christopher Medlocká James's Partner Fund Management dumped the largest position of the "upper crust" of funds we monitor, comprising close to $94 million in stock.. Bain Capital's fund, Brookside Capital, also sold off its stock, about $53 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).
Bullish insider trading is particularly usable when the company in focus has seen transactions within the past half-year. Over the last half-year time period, Textron Inc. (NYSE:TXT) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).
With the results shown by our research, retail investors must always keep an eye on hedge fund and insider trading sentiment, and Textron Inc. (NYSE:TXT) is an important part of this process.
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