Do Hedge Funds and Insiders Love Kadant Inc. (KAI)?

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What’s a smart Kadant Inc. (NYSE:KAI) investor to do?

In the eyes of many traders, hedge funds are assumed to be useless, outdated financial vehicles of a period lost to current times. Although there are more than 8,000 hedge funds in operation today, this site looks at the masters of this club, about 525 funds. It is assumed that this group controls the lion’s share of the hedge fund industry’s total assets, and by paying attention to their highest quality picks, we’ve revealed a number of investment strategies that have historically outstripped the S&P 500. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually 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 33 percentage points in 11 months (see all of our picks from August).

Just as necessary, optimistic insider trading activity is another way to analyze the stock market universe. Obviously, there are a variety of motivations for a bullish insider to cut shares of his or her company, but just one, very simple reason why they would buy. Several empirical studies have demonstrated the market-beating potential of this strategy if piggybackers know where to look (learn more here).

Kadant Inc. (NYSE:KAI)

What’s more, let’s study the recent info for Kadant Inc. (NYSE:KAI).

How are hedge funds trading Kadant Inc. (NYSE:KAI)?

At the end of the second quarter, a total of 11 of the hedge funds we track were bullish in this stock, a change of 10% from the first quarter. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly.

When using filings from the hedgies we track, Chuck Royce’s Royce & Associates had the most valuable position in Kadant Inc. (NYSE:KAI), worth close to $13.5 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Peter Algert and Kevin Coldiron of Algert Coldiron Investors, with a $2.2 million position; 0.7% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Cliff Asness’s AQR Capital Management, Joel Greenblatt’s Gotham Asset Management and Israel Englander’s Millennium Management.

As one would understandably expect, certain money managers were breaking ground themselves. Royce & Associates, managed by Chuck Royce, assembled the most valuable position in Kadant Inc. (NYSE:KAI). Royce & Associates had 13.5 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also made a $2.2 million investment in the stock during the quarter. The other funds with brand new KAI positions are Cliff Asness’s AQR Capital Management, Joel Greenblatt’s Gotham Asset Management, and Israel Englander’s Millennium Management.

What do corporate executives and insiders think about Kadant Inc. (NYSE:KAI)?

Bullish insider trading is most useful when the primary stock in question has experienced transactions within the past six months. Over the latest six-month time period, Kadant Inc. (NYSE:KAI) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Kadant Inc. (NYSE:KAI). These stocks are Flow International Corporation (NASDAQ:FLOW), Ampco-Pittsburgh Corp. (NYSE:AP), Global Power Equipment Group Inc (NASDAQ:GLPW), Twin Disc, Incorporated (NASDAQ:TWIN), and Marine Products Corp. (NYSE:MPX). All of these stocks are in the diversified machinery industry and their market caps match KAI’s market cap.

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