Applied Industrial Technologies (AIT): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Applied Industrial Technologies (NYSE:AIT) was in 11 hedge funds’ portfolio at the end of the first quarter of 2013. AIT has seen an increase in support from the world’s most elite money managers of late. There were 8 hedge funds in our database with AIT positions at the end of the previous quarter.

If you’d ask most stock holders, hedge funds are seen as underperforming, outdated financial vehicles of the past. While there are more than 8000 funds trading today, we choose to focus on the leaders of this club, around 450 funds. It is estimated that this group oversees the majority of the hedge fund industry’s total capital, and by paying attention to their highest performing stock picks, we have brought to light a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as key, positive insider trading sentiment is a second way to break down the world of equities. Just as you’d expect, there are plenty of motivations for an executive to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Various academic studies have demonstrated the useful potential of this tactic if shareholders know where to look (learn more here).

Consequently, we’re going to take a peek at the latest action regarding Applied Industrial Technologies (NYSE:AIT).

How have hedgies been trading Applied Industrial Technologies (NYSE:AIT)?

At Q1’s end, a total of 11 of the hedge funds we track held long positions in this stock, a change of 38% from the first quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly.

When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the most valuable position in Applied Industrial Technologies (NYSE:AIT), worth close to $244.1 million, accounting for 0.7% of its total 13F portfolio. On Royce & Associates’s heels is International Value Advisers, managed by Charles de Vaulx, which held a $199 million position; 4.6% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Cliff Asness’s AQR Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Ken Griffin’s Citadel Investment Group.

Now, key hedge funds were leading the bulls’ herd. International Value Advisers, managed by Charles de Vaulx, assembled the largest position in Applied Industrial Technologies (NYSE:AIT). International Value Advisers had 199 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $6.9 million position during the quarter. The other funds with brand new AIT positions are Israel Englander’s Catapult Capital Management, Mike Vranos’s Ellington, and Matthew Tewksbury’s Stevens Capital Management.

What have insiders been doing with Applied Industrial Technologies (NYSE:AIT)?

Insider purchases made by high-level executives is at its handiest when the company we’re looking at has experienced transactions within the past six months. Over the latest 180-day time period, Applied Industrial Technologies (NYSE:AIT) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Applied Industrial Technologies (NYSE:AIT). These stocks are Susser Petroleum Partners LP (NYSE:SUSP), RTI International Metals, Inc. (NYSE:RTI), DXP Enterprises Inc (NASDAQ:DXPE), WESCO International, Inc. (NYSE:WCC), and Wesco Aircraft Holdings Inc (NYSE:WAIR). All of these stocks are in the industrial equipment wholesale industry and their market caps are similar to AIT’s market cap.