Albemarle Corporation (ALB): Are Hedge Funds Right About This Stock?

Albemarle Corporation (NYSE:ALB) investors: listen here.

Now, according to many of your fellow readers, hedge funds are perceived as useless, outdated financial tools of a forgotten age. Although there are In excess of 8,000 hedge funds trading today, Insider Monkey aim at the bigwigs of this group, close to 525 funds. It is widely held that this group oversees the majority of the hedge fund industry’s total assets, and by watching their best picks, we’ve figured out a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a 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 outperformed the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as necessary, optimistic insider trading sentiment is a second way to analyze the stock market universe. Obviously, there are many stimuli for a corporate insider to downsize shares of his or her company, but only one, very clear reason why they would behave bullishly. Plenty of academic studies have demonstrated the market-beating potential of this method if you understand where to look (learn more here).

Now that that’s out of the way, we’re going to discuss the recent info surrounding Albemarle Corporation (NYSE:ALB).

What does the smart money think about Albemarle Corporation (NYSE:ALB)?

In preparation for the third quarter, a total of 14 of the hedge funds we track held long positions in this stock, a change of -18% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially.

Out of the hedge funds we follow, Thomas E. Claugus’s GMT Capital had the biggest position in Albemarle Corporation (NYSE:ALB), worth close to $50 million, comprising 1.1% of its total 13F portfolio. Coming in second is Gates Capital Management, managed by Jeffrey Gates, which held a $45.9 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include Rob Butts and Josh Clark’s Southpoint Capital Advisors, Chuck Royce’s Royce & Associates and Amy Minella’s Cardinal Capital.

Since Albemarle Corporation (NYSE:ALB) has witnessed a fall in interest from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers who sold off their positions entirely last quarter. Interestingly, Jeffrey Ubben’s ValueAct Capital dumped the biggest position of the “upper crust” of funds we watch, valued at an estimated $59.8 million in stock. Martin D. Sass’s fund, MD Sass, also said goodbye to its stock, about $29 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds last quarter.

What have insiders been doing with Albemarle Corporation (NYSE:ALB)?

Bullish insider trading is particularly usable when the company in question has experienced transactions within the past 180 days. Over the latest 180-day time frame, Albemarle Corporation (NYSE:ALB) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Albemarle Corporation (NYSE:ALB). These stocks are Westlake Chemical Corporation (NYSE:WLK), International Flavors & Fragrances Inc (NYSE:IFF), Rockwood Holdings, Inc. (NYSE:ROC), W.R. Grace & Co. (NYSE:GRA), and The Valspar Corporation (NYSE:VAL). This group of stocks are the members of the specialty chemicals industry and their market caps are similar to ALB’s market cap.

Using the returns shown by the previously mentioned analyses, average investors should always track hedge fund and insider trading sentiment, and Albemarle Corporation (NYSE:ALB) shareholders fit into this picture quite nicely.

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