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This Metric Says You Are Smart to Sell Flotek Industries Inc (FTK): Koppers Holdings Inc. (KOP), OM Group, Inc. (OMG)

Flotek Industries Inc (NYSE:FTK) was in 10 hedge funds’ portfolio at the end of the fourth quarter of 2012. FTK investors should be aware of a decrease in hedge fund interest in recent months. There were 11 hedge funds in our database with FTK positions at the end of the previous quarter.

Flotek Industries Inc (NYSE:FTK)According to most stock holders, hedge funds are viewed as slow, outdated investment tools of yesteryear. While there are greater than 8000 funds with their doors open at present, we at Insider Monkey choose to focus on the bigwigs of this group, about 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total capital, and by tracking their best picks, we have figured out a few investment strategies that have historically beaten the market. 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 outclassed the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Just as important, bullish insider trading activity is a second way to parse down the financial markets. Just as you’d expect, there are a number of motivations for a corporate insider to drop shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of academic studies have demonstrated the useful potential of this method if investors know where to look (learn more here).

Consequently, let’s take a peek at the recent action surrounding Flotek Industries Inc (NYSE:FTK).

Hedge fund activity in Flotek Industries Inc (NYSE:FTK)

At year’s end, a total of 10 of the hedge funds we track were long in this stock, a change of -9% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, Jeffrey Gates’s Gates Capital Management had the largest position in Flotek Industries Inc (NYSE:FTK), worth close to $51 million, accounting for 3.2% of its total 13F portfolio. Sitting at the No. 2 spot is William Harnisch of Peconic Partners LLC, with a $24 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Israel Englander’s Millennium Management, Drew Cupps’s Cupps Capital Management and Richard Driehaus’s Driehaus Capital.

Since Flotek Industries Inc (NYSE:FTK) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there is a sect of funds that decided to sell off their full holdings in Q4. It’s worth mentioning that Jeffrey Vinik’s Vinik Asset Management sold off the largest position of the 450+ funds we key on, comprising an estimated $2 million in stock., and Louis Navellier of Navellier & Associates was right behind this move, as the fund dumped about $1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in Q4.

Insider trading activity in Flotek Industries Inc (NYSE:FTK)

Insider trading activity, especially when it’s bullish, is best served when the company we’re looking at has experienced transactions within the past 180 days. Over the last 180-day time frame, Flotek Industries Inc (NYSE:FTK) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Flotek Industries Inc (NYSE:FTK). These stocks are Koppers Holdings Inc. (NYSE:KOP), WD-40 Company (NASDAQ:WDFC), Kraton Performance Polymers Inc (NYSE:KRA), OM Group, Inc. (NYSE:OMG), and Quaker Chemical Corp (NYSE:KWR). This group of stocks are in the specialty chemicals industry and their market caps resemble FTK’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Koppers Holdings Inc. (NYSE:KOP) 10 0 7
WD-40 Company (NASDAQ:WDFC) 4 1 4
Kraton Performance Polymers Inc (NYSE:KRA) 10 0 3
OM Group, Inc. (NYSE:OMG) 17 0 0
Quaker Chemical Corp (NYSE:KWR) 7 0 6

With the results exhibited by the aforementioned studies, everyday investors must always keep an eye on hedge fund and insider trading activity, and Flotek Industries Inc (NYSE:FTK) is no exception.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

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.

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