Should You Avoid Sensient Technologies Corporation (SXT)?: Cabot Corp (CBT), Chemtura Corp (CHMT)

Is Sensient Technologies Corporation (NYSE:SXT) a buy, sell, or hold? Investors who are in the know are taking a pessimistic view. The number of long hedge fund positions retreated by 1 in recent months.

If you’d ask most investors, hedge funds are perceived as unimportant, old financial vehicles of the past. While there are over 8000 funds with their doors open at present, we at Insider Monkey hone in on the aristocrats of this group, close to 450 funds. Most estimates calculate that this group controls the majority of the hedge fund industry’s total capital, and by tracking their best picks, we have determined a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per 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).

Mario Gabelli

Equally as important, positive insider trading activity is another way to break down the financial markets. Just as you’d expect, there are a number of motivations for an executive to get rid of shares of his or her company, but only one, very obvious reason why they would buy. Many empirical studies have demonstrated the useful potential of this tactic if piggybackers know what to do (learn more here).

Now, we’re going to take a look at the recent action encompassing Sensient Technologies Corporation (NYSE:SXT).

How are hedge funds trading Sensient Technologies Corporation (NYSE:SXT)?

At year’s end, a total of 10 of the hedge funds we track held long positions in this stock, a change of -9% from the third quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably.

According to our comprehensive database, Mario Gabelli’s GAMCO Investors had the largest position in Sensient Technologies Corporation (NYSE:SXT), worth close to $52.7 million, accounting for 0.4% of its total 13F portfolio. On GAMCO Investors’s heels is Martin Whitman of Third Avenue Management, with a $32.1 million position; 0.7% of its 13F portfolio is allocated to the stock. Other peers that are bullish include Ken Gray and Steve Walsh’s Bryn Mawr Capital, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium Management.

Since Sensient Technologies Corporation (NYSE:SXT) has faced declining sentiment from the smart money, logic holds that there lies a certain “tier” of funds that elected to cut their positions entirely at the end of the year. Intriguingly, Geoffrey S. McCuskey’s Riverside Advisors sold off the largest position of the 450+ funds we monitor, comprising about $3.3 million in stock., and Chuck Royce of Royce & Associates was right behind this move, as the fund dropped about $1.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds at the end of the year.

How have insiders been trading Sensient Technologies Corporation (NYSE:SXT)?

Insider purchases made by high-level executives is best served when the company in focus has experienced transactions within the past half-year. Over the last 180-day time frame, Sensient Technologies Corporation (NYSE:SXT) has seen zero unique insiders buying, and 4 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Sensient Technologies Corporation (NYSE:SXT). These stocks are Cabot Corp (NYSE:CBT), Chemtura Corp (NYSE:CHMT), Kronos Worldwide, Inc. (NYSE:KRO), Olin Corporation (NYSE:OLN), and HB Fuller Co (NYSE:FUL). This group of stocks belong to the specialty chemicals industry and their market caps match SXT’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Cabot Corp (NYSE:CBT) 13 0 2
Chemtura Corp (NYSE:CHMT) 25 2 0
Kronos Worldwide, Inc. (NYSE:KRO) 4 2 1
Olin Corporation (NYSE:OLN) 14 1 4
HB Fuller Co (NYSE:FUL) 9 0 4

With the results shown by Insider Monkey’s studies, everyday investors should always keep an eye on hedge fund and insider trading activity, and Sensient Technologies Corporation (NYSE:SXT) applies perfectly to this mantra.

Click here to learn why you should track hedge funds