Stage Stores Inc (SSI): Hedge Funds Are Bearish and Insiders Are Undecided, What Should You Do?

What’s smart for a Stage Stores Inc (NYSE:SSI) to do?

Now, according to many investors, hedge funds are viewed as overrated, outdated financial tools of a period lost to current times. Although there are more than 8,000 hedge funds trading currently, Insider Monkey aim at the moguls of this club, close to 525 funds. Analysts calculate that this group has its hands on most of the hedge fund industry’s total assets, and by watching their best stock picks, we’ve deciphered a number of investment strategies that have historically beaten the broader indices. 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 started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find the details here).

Equally as key, bullish insider trading sentiment is a second way to analyze the marketplace. Just as you’d expect, there are many stimuli for an executive to drop shares of his or her company, but only one, very simple reason why they would buy. Various empirical studies have demonstrated the market-beating potential of this strategy if “monkeys” know where to look (learn more here).

Stage Stores Inc (NYSE:SSI)

Now that that’s out of the way, we’re going to examine the recent info surrounding Stage Stores Inc (NYSE:SSI).

What have hedge funds been doing with Stage Stores Inc (NYSE:SSI)?

At Q2’s end, a total of 12 of the hedge funds we track held long positions in this stock, a change of -33% from the first quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially.

As Stage Stores Inc (NYSE:SSI) has witnessed declining interest from upper-tier hedge fund managers, logic holds that there exists a select few money managers who were dropping their positions entirely last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest position of the 450+ funds we watch, worth an estimated $6 million in stock. Richard Driehaus’s fund, Driehaus Capital, also sold off its stock, about $5.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 6 funds last quarter.

How have insiders been trading Stage Stores Inc (NYSE:SSI)?

Insider buying made by high-level executives is best served when the company we’re looking at has seen transactions within the past half-year. Over the last half-year time frame, Stage Stores Inc (NYSE:SSI) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also review the relationship between both of these indicators in other stocks similar to Stage Stores Inc (NYSE:SSI). These stocks are Aeropostale, Inc. (NYSE:ARO), Children’s Place Retail Stores, Inc. (NASDAQ:PLCE), The Jones Group Inc. (NYSE:JNY), rue21, inc. (NASDAQ:RUE), and Cato Corp (NYSE:CATO). This group of stocks belong to the apparel stores industry and their market caps are similar to SSI’s market cap.