Kaydon Corporation (KDN): Are Hedge Funds Right About This Stock?: MRC Global Inc (MRC), Kennametal Inc. (KMT)

Kaydon Corporation (NYSE:KDN) shareholders have witnessed an increase in enthusiasm from smart money recently.

Kaydon Corporation (NYSE:KDN)

According to most shareholders, hedge funds are assumed to be unimportant, old investment vehicles of the past. While there are greater than 8000 funds trading at the moment, we at Insider Monkey hone in on the aristocrats of this club, around 450 funds. Most estimates calculate that this group controls most of the smart money’s total capital, and by watching their best equity investments, we have come up with a number of investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year 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 outclassed the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Equally as integral, bullish insider trading activity is another way to break down the investments you’re interested in. As the old adage goes: there are a number of incentives for a bullish insider to sell shares of his or her company, but only one, very obvious reason why they would behave bullishly. Plenty of empirical studies have demonstrated the market-beating potential of this method if shareholders understand where to look (learn more here).

Consequently, let’s take a glance at the latest action surrounding Kaydon Corporation (NYSE:KDN).

What have hedge funds been doing with Kaydon Corporation (NYSE:KDN)?

At year’s end, a total of 11 of the hedge funds we track were bullish in this stock, a change of 57% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings significantly.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Kaydon Corporation (NYSE:KDN). Royce & Associates has a $41 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which held a $5 million position; the fund has 0% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include John A. Levin’s Levin Capital Strategies, Israel Englander’s Millennium Management and Ric Dillon’s Diamond Hill Capital.

With a general bullishness amongst the heavyweights, some big names have jumped into Kaydon Corporation (NYSE:KDN) headfirst. Millennium Management, managed by Israel Englander, created the largest position in Kaydon Corporation (NYSE:KDN). Millennium Management had 3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $1 million position during the quarter. The other funds with brand new KDN positions are Joel Greenblatt’s Gotham Asset Management and David Costen Haley’s HBK Investments.

How have insiders been trading Kaydon Corporation (NYSE:KDN)?

Insider purchases made by high-level executives is most useful when the company we’re looking at has seen transactions within the past six months. Over the latest half-year time period, Kaydon Corporation (NYSE:KDN) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Kaydon Corporation (NYSE:KDN). These stocks are MRC Global Inc (NYSE:MRC), Kennametal Inc. (NYSE:KMT), Proto Labs Inc (NYSE:PRLB), RBC Bearings Incorporated (NASDAQ:ROLL), and Blount International, Inc. (NYSE:BLT). This group of stocks are in the machine tools & accessories industry and their market caps are closest to KDN’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
MRC Global Inc (NYSE:MRC) 11 0 5
Kennametal Inc. (NYSE:KMT) 13 0 8
Proto Labs Inc (NYSE:PRLB) 8 1 15
RBC Bearings Incorporated (NASDAQ:ROLL) 5 0 3
Blount International, Inc. (NYSE:BLT) 13 0 0

With the results demonstrated by the aforementioned strategies, everyday investors should always monitor hedge fund and insider trading activity, and Kaydon Corporation (NYSE:KDN) is an important part of this process.

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