Destination Maternity Corp (DEST): Hedge Funds Are Bearish and Insiders Are Undecided, What Should You Do?

Is Destination Maternity Corp (NASDAQ:DEST) a good investment?

To many of your fellow readers, hedge funds are viewed as delayed, outdated investment vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds in operation today, this site looks at the aristocrats of this club, close to 525 funds. Analysts calculate that this group oversees the majority of the smart money’s total assets, and by tracking their highest quality investments, we’ve determined a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outperformed 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 trumped the S&P 500 index by 33 percentage points in 11 months (find the details here).

Just as necessary, bullish insider trading sentiment is a second way to analyze the financial markets. There are many stimuli for an executive to get rid of shares of his or her company, but just one, very obvious reason why they would behave bullishly. Plenty of academic studies have demonstrated the market-beating potential of this tactic if investors understand what to do (learn more here).

Now that that’s out of the way, let’s examine the newest info surrounding Destination Maternity Corp (NASDAQ:DEST).

What have hedge funds been doing with Destination Maternity Corp (NASDAQ:DEST)?

At Q2’s end, a total of 10 of the hedge funds we track were long in this stock, a change of -17% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully.

When using filings from the hedgies we track, Renaissance Technologies, managed by Jim Simons, holds the biggest position in Destination Maternity Corp (NASDAQ:DEST). Renaissance Technologies has a $25.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which held a $21.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds that hold long positions include Cliff Asness’s AQR Capital Management, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Joel Greenblatt’s Gotham Asset Management.

Since Destination Maternity Corp (NASDAQ:DEST) has faced a fall in interest from upper-tier hedge fund managers, it’s easy to see that there is a sect of hedge funds who were dropping their full holdings last quarter. It’s worth mentioning that Thomas E. Lynch’s Mill Road Capital Management dumped the biggest investment of the 450+ funds we track, worth close to $23.6 million in call options., and Matthew Hulsizer of Peak6 Capital Management was right behind this move, as the fund cut about $1.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

How are insiders trading Destination Maternity Corp (NASDAQ:DEST)?

Legal insider trading, particularly when it’s bullish, is most useful when the primary stock in question has seen transactions within the past six months. Over the latest half-year time period, Destination Maternity Corp (NASDAQ:DEST) has experienced zero unique insiders purchasing, 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 Destination Maternity Corp (NASDAQ:DEST). These stocks are New York & Company, Inc. (NYSE:NWY), The Wet Seal, Inc. (NASDAQ:WTSL), Stein Mart, Inc. (NASDAQ:SMRT), Tilly’s Inc (NYSE:TLYS), and bebe stores, inc. (NASDAQ:BEBE). This group of stocks are the members of the apparel stores industry and their market caps resemble DEST’s market cap.