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This Metric Says You Are Smart to Buy KAR Auction Services Inc (NYSE:KAR): Group 1 Automotive, Inc. (NYSE:GPI), Sonic Automotive Inc (NYSE:SAH)

Is KAR Auction Services Inc (NYSE:KAR) ready to raly soon? Hedge funds are in an optimistic mood. The number of long hedge fund positions rose by 3 lately.

At the moment, there are plenty of methods investors can use to track Mr. Market. Some of the most underrated are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the elite money managers can trounce the broader indices by a superb margin (see just how much).

Just as integral, positive insider trading activity is a second way to break down the investments you’re interested in. There are a variety of incentives for an insider to sell shares of his or her company, but only one, very obvious reason why they would buy. Various empirical studies have demonstrated the impressive potential of this method if “monkeys” know where to look (learn more here).

Now, let’s take a look at the key action surrounding KAR Auction Services Inc (NYSE:KAR).

Hedge fund activity in KAR Auction Services Inc (NYSE:KAR)

At the end of the fourth quarter, a total of 15 of the hedge funds we track held long positions in this stock, a change of 25% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings substantially.

VALUEACT CAPITALAccording to our comprehensive database, Amy Minella’s Cardinal Capital had the biggest position in KAR Auction Services Inc (NYSE:KAR), worth close to $49 million, comprising 3.3% of its total 13F portfolio. Sitting at the No. 2 spot is Corsair Capital Management, managed by Jay Petschek and Steven Major, which held a $27 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Other peers that hold long positions include Jeffrey Ubben’s ValueAct Capital, D. E. Shaw’s D E Shaw and Jeffrey Gates’s Gates Capital Management.

As aggregate interest increased, key hedge funds have jumped into KAR Auction Services Inc (NYSE:KAR) headfirst. Gates Capital Management, managed by Jeffrey Gates, created the most outsized position in KAR Auction Services Inc (NYSE:KAR). Gates Capital Management had 15 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $13 million investment in the stock during the quarter. The following funds were also among the new KAR investors: Peter Adam Hochfelder’s Brahman Capital, Barry Rosenstein’s JANA Partners, and Steven Cohen’s SAC Capital Advisors.

How are insiders trading KAR Auction Services Inc (NYSE:KAR)?

Insider buying is particularly usable when the company we’re looking at has experienced transactions within the past six months. Over the last six-month time frame, KAR Auction Services Inc (NYSE:KAR) has seen zero unique insiders purchasing, and 17 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to KAR Auction Services Inc (NYSE:KAR). These stocks are Group 1 Automotive, Inc. (NYSE:GPI), Sonic Automotive Inc (NYSE:SAH), AutoNation, Inc. (NYSE:AN), Copart, Inc. (NASDAQ:CPRT), and Penske Automotive Group, Inc. (NYSE:PAG). This group of stocks belong to the auto dealerships industry and their market caps resemble KAR’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Group 1 Automotive, Inc. (NYSE:GPI) 11 0 3
Sonic Automotive Inc (NYSE:SAH) 9 0 3
AutoNation, Inc. (NYSE:AN) 22 0 9
Copart, Inc. (NASDAQ:CPRT) 21 0 10
Penske Automotive Group, Inc. (NYSE:PAG) 9 0 0

With the returns exhibited by our strategies, retail investors must always keep an eye on hedge fund and insider trading sentiment, and KAR Auction Services Inc (NYSE:KAR) is an important part of this process.

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