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Vocera Communications Inc (NYSE:VCRA), Harmonic Inc (NASDAQ:HLIT): Tellabs, Inc. (NASDAQ:TLAB): Hedge Funds and Insiders Are Bearish, What Should You Do?

Tellabs, Inc. (NASDAQ:TLAB) shareholders have witnessed a decrease in hedge fund sentiment lately.

Tellabs, Inc. (NASDAQ:TLAB)In today’s marketplace, there are tons of gauges market participants can use to watch Mr. Market. A duo of the best are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the top hedge fund managers can beat the broader indices by a solid margin (see just how much).

Just as important, positive insider trading sentiment is another way to break down the world of equities. Obviously, there are a number of stimuli for an insider to cut shares of his or her company, but only one, very clear reason why they would behave bullishly. Various empirical studies have demonstrated the market-beating potential of this tactic if you understand where to look (learn more here).

With these “truths” under our belt, it’s important to take a gander at the recent action surrounding Tellabs, Inc. (NASDAQ:TLAB).

How are hedge funds trading Tellabs, Inc. (NASDAQ:TLAB)?

Heading into 2013, a total of 15 of the hedge funds we track were long in this stock, a change of -17% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully.

Of the funds we track, Martin Whitman’s Third Avenue Management had the largest position in Tellabs, Inc. (NASDAQ:TLAB), worth close to $80 million, comprising 1.7% of its total 13F portfolio. Coming in second is Dialectic Capital Management, managed by John Fichthorn, which held a $30 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Some other hedge funds that hold long positions include Cliff Asness’s AQR Capital Management, Chuck Royce’s Royce & Associates and Andrew Weiss’s Weiss Asset Management.

Judging by the fact that Tellabs, Inc. (NASDAQ:TLAB) has witnessed a declination in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds that slashed their full holdings in Q4. Intriguingly, Scott Scher & Michael Prober’s Clovis Capital Management dumped the largest stake of the “upper crust” of funds we monitor, worth an estimated $8 million in stock.. Tom Facciola’s fund, Tigershark Partners, also said goodbye to its stock, about $1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds in Q4.

How are insiders trading Tellabs, Inc. (NASDAQ:TLAB)?

Bullish insider trading is at its handiest when the company in focus has experienced transactions within the past 180 days. Over the latest 180-day time period, Tellabs, Inc. (NASDAQ:TLAB) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Tellabs, Inc. (NASDAQ:TLAB). These stocks are 8×8, Inc. (NASDAQ:EGHT), Vocera Communications Inc (NYSE:VCRA), Harmonic Inc (NASDAQ:HLIT), Infinera Corp. (NASDAQ:INFN), and Sonus Networks, Inc. (NASDAQ:SONS). This group of stocks are the members of the communication equipment industry and their market caps are similar to TLAB’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
8×8, Inc. (NASDAQ:EGHT) 7 0 2
Vocera Communications Inc (NYSE:VCRA) 9 0 13
Harmonic Inc (NASDAQ:HLIT) 11 0 1
Infinera Corp. (NASDAQ:INFN) 8 1 1
Sonus Networks, Inc. (NASDAQ:SONS) 10 1 1

With the returns exhibited by the aforementioned research, everyday investors should always pay attention to hedge fund and insider trading activity, and Tellabs, Inc. (NASDAQ:TLAB) is an important part of this process.

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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