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This Metric Says You Are Smart to Buy Precision Castparts Corp. (PCP)

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Is Precision Castparts Corp. (NYSE:PCP) a buy?

If you were to ask many traders, hedge funds are seen as useless, old financial tools of a forgotten age. Although there are In excess of 8,000 hedge funds with their doors open in present day, Insider Monkey aim at the aristocrats of this group, close to 525 funds. Analysts calculate that this group oversees most of the smart money’s total assets, and by watching their highest performing picks, we’ve spotted a number of investment strategies that have historically outpaced the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a 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 trumped the S&P 500 index by 33 percentage points in 11 months (find the details here).

Equally as useful, bullish insider trading sentiment is another way to analyze the marketplace. Just as you’d expect, there are a variety of stimuli for an upper level exec to sell shares of his or her company, but just one, very simple reason why they would initiate a purchase. Several empirical studies have demonstrated the market-beating potential of this method if piggybackers understand where to look (learn more here).

Keeping this in mind, let’s study the latest info for Precision Castparts Corp. (NYSE:PCP).

What have hedge funds been doing with Precision Castparts Corp. (NYSE:PCP)?

At the end of the second quarter, a total of 31 of the hedge funds we track held long positions in this stock, a change of 7% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably.

Precision Castparts Corp. (NYSE:PCP)According to our 13F database, Warren Buffett’s Berkshire Hathaway had the biggest position in Precision Castparts Corp. (NYSE:PCP), worth close to $446.9 million, accounting for 0.5% of its total 13F portfolio. Coming in second is Mario Gabelli of GAMCO Investors, with a $198.9 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Bain Capital’s Brookside Capital, Phill Gross and Robert Atchinson’s Adage Capital Management and Jeffrey Altman’s Owl Creek Asset Management.

As industrywide interest increased, certain money managers have been driving this bullishness. Berkshire Hathaway, managed by Warren Buffett, created the largest position in Precision Castparts Corp. (NYSE:PCP). Berkshire Hathaway had 446.9 million invested in the company at the end of the quarter. Mario Gabelli’s GAMCO Investors also initiated a $198.9 million position during the quarter. The following funds were also among the new PCP investors: Bain Capital’s Brookside Capital, Phill Gross and Robert Atchinson’s Adage Capital Management, and Jeffrey Altman’s Owl Creek Asset Management.

How have insiders been trading Precision Castparts Corp. (NYSE:PCP)?

Bullish insider trading is most useful when the company we’re looking at has seen transactions within the past 180 days. Over the last 180-day time period, Precision Castparts Corp. (NYSE:PCP) has seen zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

We’ll also review the relationship between both of these indicators in other stocks similar to Precision Castparts Corp. (NYSE:PCP). These stocks are Chart Industries, Inc. (NASDAQ:GTLS), Carpenter Technology Corporation (NYSE:CRS), Allegheny Technologies Incorporated (NYSE:ATI), Valmont Industries, Inc. (NYSE:VMI), and Reliance Steel & Aluminum (NYSE:RS). This group of stocks belong to the metal fabrication industry and their market caps resemble PCP’s market cap.

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