This Metric Says You Are Smart to Buy HEICO Corporation (HEI)

HEICO Corporation (NYSE:HEI) was in 14 hedge funds’ portfolio at the end of March. HEI has seen an increase in hedge fund interest of late. There were 11 hedge funds in our database with HEI positions at the end of the previous quarter.

To most market participants, hedge funds are seen as underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, we choose to focus on the moguls of this group, close to 450 funds. It is widely believed that this group has its hands on the lion’s share of the hedge fund industry’s total capital, and by watching their top stock picks, we have deciphered a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outpaced 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as beneficial, optimistic insider trading activity is another way to parse down the marketplace. There are lots of reasons for a corporate insider to drop shares of his or her company, but just one, very obvious reason why they would buy. Various empirical studies have demonstrated the valuable potential of this strategy if piggybackers understand where to look (learn more here).

Now, it’s important to take a peek at the recent action surrounding HEICO Corporation (NYSE:HEI).

What does the smart money think about HEICO Corporation (NYSE:HEI)?

At the end of the first quarter, a total of 14 of the hedge funds we track were bullish in this stock, a change of 27% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly.

Of the funds we track, Select Equity Group, managed by Robert Joseph Caruso, holds the most valuable position in HEICO Corporation (NYSE:HEI). Select Equity Group has a $80.6 million position in the stock, comprising 1.1% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, managed by Chuck Royce, which held a $67.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Chuck Royce’s Royce & Associates, Brian Bares’s Bares Capital Management and Bill Miller’s Legg Mason Capital Management.

As aggregate interest increased, key money managers were breaking ground themselves. Ancient Art (Teton Capital), managed by Quincy Lee, created the biggest position in HEICO Corporation (NYSE:HEI). Ancient Art (Teton Capital) had 2.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.8 million investment in the stock during the quarter. The other funds with brand new HEI positions are Joel Greenblatt’s Gotham Asset Management, John Zaro’s Bourgeon Capital, and Ken Griffin’s Citadel Investment Group.

What have insiders been doing with HEICO Corporation (NYSE:HEI)?

Insider buying is best served when the company in focus has experienced transactions within the past half-year. Over the last six-month time period, HEICO Corporation (NYSE:HEI) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to HEICO Corporation (NYSE:HEI). These stocks are Huntington Ingalls Industries Inc (NYSE:HII), Moog Inc (NYSE:MOG-A), CAE, Inc. (USA) (NYSE:CAE), Alliant Techsystems Inc. (NYSE:ATK), and Esterline Technologies Corporation (NYSE:ESL). This group of stocks belong to the aerospace/defense products & services industry and their market caps resemble HEI’s market cap.