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Williams-Sonoma, Inc. (WSM): Hedge Funds and Insiders Are Bearish, What Should You Do?

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Williams-Sonoma, Inc. (NYSE:WSM) was in 16 hedge funds’ portfolio at the end of March. WSM investors should pay attention to a decrease in hedge fund interest of late. There were 23 hedge funds in our database with WSM holdings at the end of the previous quarter.

To most market participants, hedge funds are seen as unimportant, outdated investment vehicles of yesteryear. While there are over 8000 funds with their doors open at present, we look at the masters of this club, about 450 funds. It is widely believed that this group has its hands on most of all hedge funds’ total asset base, and by watching their top investments, we have come up with a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outstripped 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 trumped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Williams-Sonoma, Inc. (NYSE:WSM)Equally as key, bullish insider trading sentiment is another way to break down the marketplace. There are a variety of incentives for a bullish insider to get rid of shares of his or her company, but just one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this strategy if piggybackers know where to look (learn more here).

Keeping this in mind, we’re going to take a peek at the latest action regarding Williams-Sonoma, Inc. (NYSE:WSM).

How have hedgies been trading Williams-Sonoma, Inc. (NYSE:WSM)?

In preparation for this quarter, a total of 16 of the hedge funds we track were long in this stock, a change of -30% from one quarter earlier.

Judging by the fact that Williams-Sonoma, Inc. (NYSE:WSM) has witnessed falling interest from the smart money, logic holds that there lies a certain “tier” of hedgies who were dropping their entire stakes in Q1. Interestingly, Ken Griffin’s Citadel Investment Group dumped the largest position of the “upper crust” of funds we key on, totaling close to $76.9 million in stock. Robert Pohly’s fund, Samlyn Capital, also said goodbye to its stock, about $61.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds in Q1.

What do corporate executives and insiders think about Williams-Sonoma, Inc. (NYSE:WSM)?

Insider purchases made by high-level executives is best served when the company in focus has experienced transactions within the past half-year. Over the latest six-month time frame, Williams-Sonoma, Inc. (NYSE:WSM) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Williams-Sonoma, Inc. (NYSE:WSM). These stocks are Gordmans Stores, Inc. (NASDAQ:GMAN), Haverty Furniture Companies, Inc. (NYSE:HVT), Restoration Hardware Holdings Inc (NYSE:RH), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and Pier 1 Imports, Inc. (NYSE:PIR). This group of stocks are the members of the home furnishing stores industry and their market caps are similar to WSM’s market cap.

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