Is Ducommun Incorporated (NYSE:DCO) ready to raly soon? The best stock pickers are taking a bearish view. The number of bullish hedge fund positions stayed the same which is a slightly negative development in our experience
If you’d ask most stock holders, hedge funds are viewed as worthless, old financial vehicles of the past. While there are greater than 8000 funds in operation at present, we at Insider Monkey choose to focus on the elite of this group, about 450 funds. It is estimated that this group has its hands on the lion’s share of the smart money’s total asset base, and by paying attention to their top investments, we have discovered a few investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (see the details here).
Just as key, optimistic insider trading activity is a second way to parse down the stock market universe. Just as you’d expect, there are plenty of reasons for an executive to cut shares of his or her company, but just one, very clear reason why they would behave bullishly. Plenty of empirical studies have demonstrated the valuable potential of this strategy if you know where to look (learn more here).
With these “truths” under our belt, let’s take a look at the recent action regarding Ducommun Incorporated (NYSE:DCO).
How are hedge funds trading Ducommun Incorporated (NYSE:DCO)?
In preparation for this year, a total of 7 of the hedge funds we track held long positions in this stock, a change of 0% from the third quarter. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly.
According to our comprehensive database, Chuck Royce’s Royce & Associates had the biggest position in Ducommun Incorporated (NYSE:DCO), worth close to $3.2 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Jeffrey Gendell of Tontine Asset Management, with a $2.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Mario Gabelli’s GAMCO Investors, Jim Simons’s Renaissance Technologies and D. E. Shaw’s D E Shaw.
Seeing as Ducommun Incorporated (NYSE:DCO) has witnessed falling interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds who sold off their full holdings heading into 2013. At the top of the heap, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners dropped the largest stake of the 450+ funds we monitor, comprising about $0.2 million in stock. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
How have insiders been trading Ducommun Incorporated (NYSE:DCO)?
Insider buying is most useful when the company we’re looking at has seen transactions within the past six months. Over the last 180-day time period, Ducommun Incorporated (NYSE:DCO) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to Ducommun Incorporated (NYSE:DCO). These stocks are Astronics Corporation (NASDAQ:ATRO), TASER International, Inc. (NASDAQ:TASR), AeroVironment, Inc. (NASDAQ:AVAV), Erickson Air-Crane Inc (NASDAQ:EAC), and LMI Aerospace, Inc. (NASDAQ:LMIA). All of these stocks are in the aerospace/defense products & services industry and their market caps are similar to DCO’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Astronics Corporation (NASDAQ:ATRO) | 6 | 0 | 2 |
| TASER International, Inc. (NASDAQ:TASR) | 16 | 1 | 2 |
| AeroVironment, Inc. (NASDAQ:AVAV) | 11 | 0 | 3 |
| Erickson Air-Crane Inc (NASDAQ:EAC) | 3 | 0 | 0 |
| LMI Aerospace, Inc. (NASDAQ:LMIA) | 2 | 0 | 0 |
With the returns shown by our research, everyday investors must always watch hedge fund and insider trading sentiment, and Ducommun Incorporated (NYSE:DCO) applies perfectly to this mantra.
