Is Skullcandy Inc (NASDAQ:SKUL) going to take off soon? Prominent investors are selling. The number of bullish hedge fund positions dropped by 2 lately.
If you’d ask most market participants, hedge funds are viewed as unimportant, outdated financial vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, we look at the aristocrats of this group, close to 450 funds. It is widely believed that this group controls the lion’s share of the smart money’s total asset base, and by keeping an eye on their top equity investments, we have uncovered a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outpaced 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 beaten the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).
Equally as important, optimistic insider trading activity is another way to break down the financial markets. There are a number of incentives for a bullish insider to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the market-beating potential of this method if investors understand what to do (learn more here).
With these “truths” under our belt, we’re going to take a look at the latest action regarding Skullcandy Inc (NASDAQ:SKUL).
Hedge fund activity in Skullcandy Inc (NASDAQ:SKUL)
At the end of the fourth quarter, a total of 6 of the hedge funds we track were long in this stock, a change of -25% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly.
According to our comprehensive database, Royce & Associates, managed by Chuck Royce, holds the largest position in Skullcandy Inc (NASDAQ:SKUL). Royce & Associates has a $5.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Marathon Partners, managed by Mario Cibelli, which held a $2.8 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Some other hedge funds that hold long positions include Paul Tudor Jones’s Tudor Investment Corp, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management.
Judging by the fact that Skullcandy Inc (NASDAQ:SKUL) has experienced a declination in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedge funds that elected to cut their entire stakes in Q4. Intriguingly, Robert B. Gillam’s McKinley Capital Management dropped the biggest investment of the 450+ funds we track, totaling about $1.1 million in stock., and David Costen Haley of HBK Investments was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds in Q4.
Insider trading activity in Skullcandy Inc (NASDAQ:SKUL)
Bullish insider trading is most useful when the company in focus has seen transactions within the past half-year. Over the last six-month time period, Skullcandy Inc (NASDAQ:SKUL) has experienced 2 unique insiders buying, and 3 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Skullcandy Inc (NASDAQ:SKUL). These stocks are Research Frontiers, Inc. (NASDAQ:REFR), Ballard Power Systems Inc. (USA) (NASDAQ:BLDP), Exide Technologies (NASDAQ:XIDE), JinkoSolar Holding Co., Ltd. (NYSE:JKS), and LSI Industries, Inc. (NASDAQ:LYTS). This group of stocks are the members of the industrial electrical equipment industry and their market caps are closest to SKUL’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Research Frontiers, Inc. (NASDAQ:REFR)||2||0||0|
|Ballard Power Systems Inc. (USA) (NASDAQ:BLDP)||3||0||0|
|Exide Technologies (NASDAQ:XIDE)||12||1||0|
|JinkoSolar Holding Co., Ltd. (NYSE:JKS)||4||0||0|
|LSI Industries, Inc. (NASDAQ:LYTS)||4||0||0|
With the results exhibited by the aforementioned studies, everyday investors should always watch hedge fund and insider trading activity, and Skullcandy Inc (NASDAQ:SKUL) shareholders fit into this picture quite nicely.