Worthington Industries, Inc. (WOR): Hedge Funds and Insiders Are Bearish, What Should You Do?

Is Worthington Industries, Inc. (NYSE:WOR) a buy, sell, or hold? Prominent investors are becoming less hopeful. The number of bullish hedge fund positions dropped by 2 in recent months.

David Dreman

To most traders, hedge funds are assumed to be worthless, old investment vehicles of years past. While there are over 8000 funds in operation at the moment, we look at the upper echelon of this group, close to 450 funds. Most estimates calculate that this group controls the majority of the smart money’s total capital, and by watching their highest performing investments, we have spotted a number of investment strategies that have historically outstripped the market. 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 trumped the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Equally as beneficial, optimistic insider trading activity is a second way to parse down the stock market universe. Just as you’d expect, there are lots of reasons for a bullish insider to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various academic studies have demonstrated the useful potential of this tactic if piggybackers understand what to do (learn more here).

With these “truths” under our belt, let’s take a peek at the latest action surrounding Worthington Industries, Inc. (NYSE:WOR).

How are hedge funds trading Worthington Industries, Inc. (NYSE:WOR)?

Heading into 2013, a total of 7 of the hedge funds we track were bullish in this stock, a change of -22% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few 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 Worthington Industries, Inc. (NYSE:WOR). Royce & Associates has a $49.9 million position in the stock, comprising 0.2% of its 13F portfolio. On Royce & Associates’s heels is David Dreman of Dreman Value Management, with a $25.8 million position; 0.7% of its 13F portfolio is allocated to the stock. Remaining hedgies that hold long positions include Cliff Asness’s AQR Capital Management, Jim Simons’s Renaissance Technologies and Mike Vranos’s Ellington.

Judging by the fact that Worthington Industries, Inc. (NYSE:WOR) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of funds who sold off their entire stakes last quarter. Intriguingly, Israel Englander’s Millennium Management cut the largest position of the “upper crust” of funds we key on, totaling close to $2.2 million in stock., and Paul Tudor Jones of Tudor Investment Corp was right behind this move, as the fund said goodbye to about $0.5 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds last quarter.

Insider trading activity in Worthington Industries, Inc. (NYSE:WOR)

Insider trading activity, especially when it’s bullish, is best served when the company in question has seen transactions within the past half-year. Over the latest 180-day time period, Worthington Industries, Inc. (NYSE:WOR) has seen zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Worthington Industries, Inc. (NYSE:WOR). These stocks are Allegheny Technologies Incorporated (NYSE:ATI), Mueller Industries, Inc. (NYSE:MLI), Carpenter Technology Corporation (NYSE:CRS), Chart Industries, Inc. (NASDAQ:GTLS), and Sims Metal Management Ltd (ADR) (NYSE:SMS). This group of stocks belong to the metal fabrication industry and their market caps are similar to WOR’s market cap.