Barnes & Noble, Inc. (BKS): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Is Barnes & Noble, Inc. (NYSE:BKS) an excellent investment now? Prominent investors are getting more optimistic. The number of bullish hedge fund bets inched up by 1 lately.

In the financial world, there are a multitude of indicators shareholders can use to watch stocks. A duo of the most underrated are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite investment managers can beat the market by a solid amount (see just how much).

Barnes & Noble, Inc. (NYSE:BKS)Just as integral, positive insider trading activity is another way to parse down the marketplace. There are lots of stimuli for a bullish insider to drop shares of his or her company, but only one, very obvious reason why they would buy. Several academic studies have demonstrated the valuable potential of this strategy if investors understand where to look (learn more here).

With these “truths” under our belt, we’re going to take a gander at the latest action encompassing Barnes & Noble, Inc. (NYSE:BKS).

How are hedge funds trading Barnes & Noble, Inc. (NYSE:BKS)?

At the end of the first quarter, a total of 20 of the hedge funds we track held long positions in this stock, a change of 5% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially.

When looking at the hedgies we track, Kingstown Capital Management, managed by Michael Blitzer, holds the biggest position in Barnes & Noble, Inc. (NYSE:BKS). Kingstown Capital Management has a $24.7 million position in the stock, comprising 4.5% of its 13F portfolio. Coming in second is SAC Capital Advisors, managed by Steven Cohen, which held a $18.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Michael Price’s MFP Investors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Eliav Assouline and Marc Andersen’s Axial Capital.

As one would reasonably expect, specific money managers have been driving this bullishness. Axial Capital, managed by Eliav Assouline and Marc Andersen, created the biggest position in Barnes & Noble, Inc. (NYSE:BKS). Axial Capital had 6.5 million invested in the company at the end of the quarter. John A. Levin’s Levin Capital Strategies also initiated a $5.3 million position during the quarter. The following funds were also among the new BKS investors: Thomas A. Giovine’s Giovine Capital, Matthew Hulsizer’s PEAK6 Capital Management, and SAC Subsidiary’s CR Intrinsic Investors.

How have insiders been trading Barnes & Noble, Inc. (NYSE:BKS)?

Insider purchases made by high-level executives is best served when the primary stock in question has seen transactions within the past half-year. Over the latest 180-day time period, Barnes & Noble, Inc. (NYSE:BKS) has seen zero unique insiders buying, and 3 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Barnes & Noble, Inc. (NYSE:BKS). These stocks are Francesca’s Holdings Corp (NASDAQ:FRAN), EZCORP Inc (NASDAQ:EZPW), Office Depot Inc (NYSE:ODP), OfficeMax Inc (NYSE:OMX), and Finish Line Inc (NASDAQ:FINL). This group of stocks are in the specialty retail, other industry and their market caps resemble BKS’s market cap.