Leggett & Platt, Inc. (NYSE:LEG) has seen an increase in activity from the world’s largest hedge funds in recent months.
If you’d ask most investors, hedge funds are assumed to be underperforming, outdated financial tools of years past. While there are over 8000 funds with their doors open at present, we look at the upper echelon of this club, close to 450 funds. It is estimated that this group has its hands on the lion’s share of all hedge funds’ total asset base, and by tracking their highest performing equity investments, we have identified a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year 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 topped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Just as beneficial, positive insider trading activity is a second way to parse down the marketplace. As the old adage goes: there are plenty of stimuli for an insider to sell shares of his or her company, but only one, very simple reason why they would buy. Plenty of academic studies have demonstrated the useful potential of this strategy if piggybackers understand where to look (learn more here).
Consequently, we’re going to take a gander at the latest action surrounding Leggett & Platt, Inc. (NYSE:LEG).
How are hedge funds trading Leggett & Platt, Inc. (NYSE:LEG)?
At the end of the fourth quarter, a total of 14 of the hedge funds we track held long positions in this stock, a change of 8% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially.
According to our comprehensive database, Kensico Capital, managed by Michael Lowenstein, holds the biggest position in Leggett & Platt, Inc. (NYSE:LEG). Kensico Capital has a $59 million position in the stock, comprising 1.8% of its 13F portfolio. On Kensico Capital’s heels is Israel Englander of Millennium Management, with a $6 million position; the fund has 0% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include David Harding’s Winton Capital Management, Ken Griffin’s Citadel Investment Group and Ric Dillon’s Diamond Hill Capital.
As one would reasonably expect, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the largest position in Leggett & Platt, Inc. (NYSE:LEG). Millennium Management had 6 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $0 million investment in the stock during the quarter. The following funds were also among the new LEG investors: Steven Cohen’s SAC Capital Advisors and David Costen Haley’s HBK Investments.
What have insiders been doing with Leggett & Platt, Inc. (NYSE:LEG)?
Bullish insider trading is particularly usable when the company in question has seen transactions within the past half-year. Over the last six-month time frame, Leggett & Platt, Inc. (NYSE:LEG) has experienced zero unique insiders purchasing, and 11 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to Leggett & Platt, Inc. (NYSE:LEG). These stocks are Fortune Brands Home & Security Inc (NYSE:FBHS), Tempur-Pedic International Inc. (NYSE:TPX), Mattress Firm Holding Corp (NASDAQ:MFRM), Select Comfort Corp. (NASDAQ:SCSS), and La-Z-Boy Incorporated (NYSE:LZB). This group of stocks are the members of the home furnishings & fixtures industry and their market caps resemble LEG’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Fortune Brands Home & Security Inc (NYSE:FBHS)||29||1||9|
|Tempur-Pedic International Inc. (NYSE:TPX)||15||1||3|
|Mattress Firm Holding Corp (NASDAQ:MFRM)||8||0||8|
|Select Comfort Corp. (NASDAQ:SCSS)||16||0||3|
|La-Z-Boy Incorporated (NYSE:LZB)||11||0||5|
With the returns shown by Insider Monkey’s studies, retail investors must always watch hedge fund and insider trading activity, and Leggett & Platt, Inc. (NYSE:LEG) is an important part of this process.
Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.