Cabot Corp (CBT): Hedge Funds and Insiders Are Bearish, What Should You Do?

Is Cabot Corp (NYSE:CBT) undervalued? Money managers are in a pessimistic mood. The number of bullish hedge fund bets were trimmed by 2 in recent months.

At the moment, there are dozens of metrics investors can use to analyze stocks. A pair of the most underrated are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform the S&P 500 by a very impressive amount (see just how much).

Equally as key, bullish insider trading activity is a second way to parse down the world of equities. Just as you’d expect, there are lots of reasons for an insider to drop shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the impressive potential of this method if you understand what to do (learn more here).

With all of this in mind, we’re going to take a look at the key action encompassing Cabot Corp (NYSE:CBT).

What does the smart money think about Cabot Corp (NYSE:CBT)?

At Q1’s end, a total of 12 of the hedge funds we track were bullish in this stock, a change of -14% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully.

According to our comprehensive database, Chuck Royce’s Royce & Associates had the most valuable position in Cabot Corp (NYSE:CBT), worth close to $104.4 million, comprising 0.3% of its total 13F portfolio. On Royce & Associates’s heels is Thomas E. Claugus of GMT Capital, with a $59.5 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Paul Singer’s Elliott Management, David Dreman’s Dreman Value Management and Cliff Asness’s AQR Capital Management.

Judging by the fact that Cabot Corp (NYSE:CBT) has faced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few money managers that decided to sell off their positions entirely at the end of the first quarter. Intriguingly, Robert Bishop’s Impala Asset Management cut the biggest investment of the 450+ funds we watch, worth an estimated $11.9 million in stock., and Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital was right behind this move, as the fund said goodbye to about $1.5 million worth. These moves are interesting, as total hedge fund interest dropped by 2 funds at the end of the first quarter.

How are insiders trading Cabot Corp (NYSE:CBT)?

Bullish insider trading is particularly usable when the primary stock in question has experienced transactions within the past 180 days. Over the last half-year time frame, Cabot Corp (NYSE:CBT) has seen zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Cabot Corp (NYSE:CBT). These stocks are Sensient Technologies Corporation (NYSE:SXT), PolyOne Corporation (NYSE:POL), HB Fuller Co (NYSE:FUL), Olin Corporation (NYSE:OLN), and Chemtura Corp (NYSE:CHMT). This group of stocks are in the specialty chemicals industry and their market caps resemble CBT’s market cap.

With the returns demonstrated by the aforementioned research, retail investors must always pay attention to hedge fund and insider trading activity, and Cabot Corp (NYSE:CBT) is an important part of this process.

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