Arbitron Inc. (ARB): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Arbitron Inc. (NYSE:ARB) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months.

If you’d ask most market participants, hedge funds are perceived as worthless, outdated investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, we at Insider Monkey look at the upper echelon of this club, close to 450 funds. It is estimated that this group controls the lion’s share of the hedge fund industry’s total capital, and by paying attention to their top equity investments, we have revealed a few investment strategies that have historically beaten 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 started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Equally as important, bullish insider trading sentiment is another way to parse down the financial markets. There are plenty of stimuli for an insider to sell shares of his or her company, but only one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the market-beating potential of this tactic if investors understand where to look (learn more here).

With all of this in mind, we’re going to take a gander at the latest action encompassing Arbitron Inc. (NYSE:ARB).

What have hedge funds been doing with Arbitron Inc. (NYSE:ARB)?

At the end of the first quarter, a total of 25 of the hedge funds we track were bullish in this stock, a change of 19% from the first quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully.

Of the funds we track, Cliff Asness’s AQR Capital Management had the most valuable position in Arbitron Inc. (NYSE:ARB), worth close to $67.1 million, comprising 0.3% of its total 13F portfolio. On AQR Capital Management’s heels is John Bader of Halcyon Asset Management, with a $54.5 million position; the fund has 9.9% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Robert Emil Zoellner’s Alpine Associates, Jim Simons’s Renaissance Technologies and Shane Finemore’s Manikay Partners.

Now, specific money managers were breaking ground themselves. Alpine Associates, managed by Robert Emil Zoellner, initiated the most valuable position in Arbitron Inc. (NYSE:ARB). Alpine Associates had 38.5 million invested in the company at the end of the quarter. Shane Finemore’s Manikay Partners also made a $17.1 million investment in the stock during the quarter. The other funds with new positions in the stock are John Thiessen’s Vertex One Asset Management, Israel Englander’s Millennium Management, and Sander Gerber’s Hudson Bay Capital Management.

What do corporate executives and insiders think about Arbitron Inc. (NYSE:ARB)?

Insider purchases made by high-level executives is best served when the company in question has experienced transactions within the past six months. Over the last six-month time frame, Arbitron Inc. (NYSE:ARB) has seen zero unique insiders purchasing, and 6 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 Arbitron Inc. (NYSE:ARB). These stocks are Millennial Media, Inc. (NYSE:MM), MDC Partners Inc. (USA) (NASDAQ:MDCA), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), National CineMedia, Inc. (NASDAQ:NCMI), and Valassis Communications, Inc. (NYSE:VCI). This group of stocks belong to the marketing services industry and their market caps resemble ARB’s market cap.