Staples, Inc. (NASDAQ:SPLS) has been absolutely destroyed today. What if we told you there was one indicator that, if tracked, you could have known about this bearishness, and acted upon it? Fortunately for you, there is such a metric, and while you might've missed out on Staples, there are plenty more opportunities to have if you know where to look.
In the eyes of many of your peers, hedge funds are viewed as bloated, outdated investment vehicles of a forgotten age. Although there are more than 8,000 hedge funds trading in present day, Insider Monkey focuses on the aristocrats of this group, close to 525 funds. Analysts calculate that this group has its hands on the lion's share of the smart money's total assets, and by keeping an eye on their best investments, we've figured out a number of investment strategies that have historically outperformed the market. 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 began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find the details here).
Just as useful, optimistic insider trading activity is another way to look at the marketplace. Just as you'd expect, there are many stimuli for an executive to get rid of shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Many empirical studies have demonstrated the valuable potential of this tactic if "monkeys" understand what to do (learn more here).
Now that that's out of the way, we're going to examine the latest info for Staples, Inc. (NASDAQ:SPLS).
Heading into Q3, a total of 27 of the hedge funds we track were bullish in this stock, a change of -27% from one quarter earlier. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably.
Out of the hedge funds we follow, Richard S. Pzena's Pzena Investment Management had the most valuable position in Staples, Inc. (NASDAQ:SPLS), worth close to $554.6 million, comprising 3.7% of its total 13F portfolio. Coming in second is Harris Associates, managed by Natixis Global Asset Management, which held a $193.7 million position; 0.4% of its 13F portfolio is allocated to the stock. Other hedgies with similar optimism include Russell Hawkins's Hawkins Capital, Daniel Bubis's Tetrem Capital Management and Donald Yacktman's Yacktman Asset Management.
Due to the fact Staples has witnessed a fall in interest from the smart money's best and brightest, it's safe to say that there is a sect of hedge funds that decided to sell off their full holdings heading into Q2. Interestingly, Robert Joseph Caruso's Select Equity Group dropped the largest position of the "upper crust" of funds we key on, valued at close to $38.9 million in call options., and David Costen Haley of HBK Investments was right behind this move, as the fund dumped about $20.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 10 funds heading into Q2.
Insider buying made by high-level executives is most useful when the company in focus has experienced transactions within the past half-year. Over the last 180-day time frame, Staples has seen 1 unique insiders buying, and 6 insider sales (see the details of insider trades here).
Using the results shown by our research, regular investors must always keep one eye on hedge fund and insider trading activity, and Staples applies perfectly to this mantra.