Proto Labs Inc (PRLB): Insiders Are Buying, Should You?: MRC Global Inc (MRC), Kennametal Inc. (KMT)

Is Proto Labs Inc (NYSE:PRLB) worth your attention right now? Hedge funds are taking an optimistic view. The number of long hedge fund bets increased by 2 in recent months.

According to most market participants, hedge funds are perceived as underperforming, old investment vehicles of yesteryear. While there are more than 8000 funds trading today, we at Insider Monkey hone in on the masters of this club, close to 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total capital, and by watching their best equity investments, we have come up with a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outpaced 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 key, optimistic insider trading activity is a second way to parse down the marketplace. Just as you’d expect, there are lots of incentives for an upper level exec to downsize shares of his or her company, but only one, very clear reason why they would behave bullishly. Many academic studies have demonstrated the valuable potential of this method if piggybackers know what to do (learn more here).

Now, let’s take a peek at the key action surrounding Proto Labs Inc (NYSE:PRLB).

Hedge fund activity in Proto Labs Inc (NYSE:PRLB)

At year’s end, a total of 8 of the hedge funds we track were long in this stock, a change of 33% from the third quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly.

Of the funds we track, Cupps Capital Management, managed by Drew Cupps, holds the largest position in Proto Labs Inc (NYSE:PRLB). Cupps Capital Management has a $17 million position in the stock, comprising 1.8% of its 13F portfolio. Coming in second is Alyeska Investment Group, managed by Anand Parekh, which held a $5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Richard Driehaus’s Driehaus Capital, Chuck Royce’s Royce & Associates and Ken Griffin’s Citadel Investment Group.

Now, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in Proto Labs Inc (NYSE:PRLB). Citadel Investment Group had 3 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $2 million investment in the stock during the quarter.

What do corporate executives and insiders think about Proto Labs Inc (NYSE:PRLB)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has experienced transactions within the past 180 days. Over the latest six-month time frame, Proto Labs Inc (NYSE:PRLB) has experienced 1 unique insiders purchasing, and 15 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 Proto Labs Inc (NYSE:PRLB). These stocks are MRC Global Inc (NYSE:MRC), Kennametal Inc. (NYSE:KMT), Blount International, Inc. (NYSE:BLT), Kaydon Corporation (NYSE:KDN), and RBC Bearings Incorporated (NASDAQ:ROLL). This group of stocks are in the machine tools & accessories industry and their market caps are similar to PRLB’s market cap.