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This Metric Says You Are Smart to Buy HSN, Inc. (HSNI): Vitamin Shoppe Inc (VSI), Coinstar, Inc. (CSTR)

HSN, Inc. (NASDAQ:HSNI) investors should pay attention to an increase in enthusiasm from smart money recently.

HSN, Inc.

To most stock holders, hedge funds are assumed to be worthless, outdated financial tools of yesteryear. While there are greater than 8000 funds trading today, we at Insider Monkey choose to focus on the masters of this club, around 450 funds. It is widely believed that this group controls the majority of the hedge fund industry’s total capital, and by keeping an eye on their top picks, we have formulated a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outstripped 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 topped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Just as important, optimistic insider trading activity is a second way to parse down the investments you’re interested in. As the old adage goes: there are lots of stimuli for an executive to drop shares of his or her company, but only one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the valuable potential of this strategy if “monkeys” understand what to do (learn more here).

Keeping this in mind, it’s important to take a gander at the key action regarding HSN, Inc. (NASDAQ:HSNI).

Hedge fund activity in HSN, Inc. (NASDAQ:HSNI)

At the end of the fourth quarter, a total of 10 of the hedge funds we track were long in this stock, a change of 25% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes meaningfully.

Of the funds we track, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in HSN, Inc. (NASDAQ:HSNI). Citadel Investment Group has a $18 million position in the stock, comprising 0% of its 13F portfolio. The second largest stake is held by Mario Gabelli of GAMCO Investors, with a $12 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Seymour Sy Kaufman and Michael Stark’s Crosslink Capital, Eric Semler’s TCS Capital Management and Murray Stahl’s Horizon Asset Management.

As one would reasonably expect, key hedge funds have jumped into HSN, Inc. (NASDAQ:HSNI) headfirst. Crosslink Capital, managed by Seymour Sy Kaufman and Michael Stark, assembled the most valuable position in HSN, Inc. (NASDAQ:HSNI). Crosslink Capital had 4 million invested in the company at the end of the quarter. Eric Semler’s TCS Capital Management also initiated a $3 million position during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Ken Gray and Steve Walsh’s Bryn Mawr Capital, and Israel Englander’s Millennium Management.

What have insiders been doing with HSN, Inc. (NASDAQ:HSNI)?

Bullish insider trading is particularly usable when the company we’re looking at has seen transactions within the past half-year. Over the latest six-month time period, HSN, Inc. (NASDAQ:HSNI) has experienced 1 unique insiders buying, and 8 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 HSN, Inc. (NASDAQ:HSNI). These stocks are Vitamin Shoppe Inc (NYSE:VSI), Coinstar, Inc. (NASDAQ:CSTR), Sally Beauty Holdings, Inc. (NYSE:SBH), Five Below Inc (NASDAQ:FIVE), and Sothebys (NYSE:BID). This group of stocks belong to the specialty retail, other industry and their market caps are similar to HSNI’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Vitamin Shoppe Inc (NYSE:VSI) 11 2 2
Coinstar, Inc. (NASDAQ:CSTR) 28 0 6
Sally Beauty Holdings, Inc. (NYSE:SBH) 33 1 5
Five Below Inc (NASDAQ:FIVE) 6 0 22
Sothebys (NYSE:BID) 14 0 10

With the returns demonstrated by the aforementioned studies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and HSN, Inc. (NASDAQ:HSNI) applies perfectly to this mantra.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.