Do Hedge Funds and Insiders Love American Railcar Industries, Inc. (ARII)?

American Railcar Industries, Inc. (NASDAQ:ARII) was in 15 hedge funds’ portfolio at the end of the first quarter of 2013. ARII investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 19 hedge funds in our database with ARII holdings at the end of the previous quarter.

If you’d ask most stock holders, hedge funds are seen as worthless, old investment tools of the past. While there are more than 8000 funds trading today, we at Insider Monkey choose to focus on the crème de la crème of this club, close to 450 funds. It is widely believed that this group controls most of all hedge funds’ total asset base, and by paying attention to their top equity investments, we have formulated a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as integral, bullish insider trading sentiment is another way to parse down the stock market universe. Obviously, there are lots of motivations for a corporate insider to get rid of shares of his or her company, but only one, very clear reason why they would initiate a purchase. Plenty of academic studies have demonstrated the valuable potential of this method if piggybackers know what to do (learn more here).

Now, let’s take a gander at the recent action regarding American Railcar Industries, Inc. (NASDAQ:ARII).

Hedge fund activity in American Railcar Industries, Inc. (NASDAQ:ARII)

At Q1’s end, a total of 15 of the hedge funds we track were bullish in this stock, a change of -21% from the first quarter. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully.

According to our comprehensive database, Carl Icahn’s Icahn Capital LP had the biggest position in American Railcar Industries, Inc. (NASDAQ:ARII), worth close to $554.9 million, comprising 3.3% of its total 13F portfolio. Coming in second is Jim Simons of Renaissance Technologies, with a $11.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedgies with similar optimism include Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group.

Since American Railcar Industries, Inc. (NASDAQ:ARII) has witnessed falling interest from the smart money, it’s safe to say that there were a few hedgies that slashed their full holdings at the end of the first quarter. It’s worth mentioning that Paul Reeder and Edward Shapiro’s PAR Capital Management cut the largest investment of the “upper crust” of funds we track, comprising close to $8.1 million in stock.. Alexander Mitchell’s fund, Scopus Asset Management, also sold off its stock, about $7.1 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds at the end of the first quarter.

What have insiders been doing with American Railcar Industries, Inc. (NASDAQ:ARII)?

Insider purchases made by high-level executives is most useful when the company we’re looking at has seen transactions within the past six months. Over the latest six-month time period, American Railcar Industries, Inc. (NASDAQ:ARII) has seen zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to American Railcar Industries, Inc. (NASDAQ:ARII). These stocks are Westinghouse Air Brake Technologies Corp (NYSE:WAB), FreightCar America, Inc. (NASDAQ:RAIL), Trinity Industries, Inc. (NYSE:TRN), Guangshen Railway Co. Ltd (ADR) (NYSE:GSH), and Greenbrier Companies Inc (NYSE:GBX). All of these stocks are in the railroads industry and their market caps match ARII’s market cap.

With the returns shown by Insider Monkey’s research, everyday investors must always watch hedge fund and insider trading activity, and American Railcar Industries, Inc. (NASDAQ:ARII) applies perfectly to this mantra.

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