Do Hedge Funds and Insiders Love Central Garden & Pet Co (CENT)?

Is Central Garden & Pet Co (NASDAQ:CENT) a buy here? The best stock pickers are getting less optimistic. The number of bullish hedge fund bets were cut by 1 recently.

According to most stock holders, hedge funds are seen as underperforming, outdated financial tools of the past. While there are more than 8000 funds in operation today, we at Insider Monkey hone in on the upper echelon of this group, close to 450 funds. It is widely believed that this group has its hands on most of the smart money’s total asset base, and by monitoring their best stock picks, we have discovered a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually 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 outpaced the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Just as key, bullish insider trading activity is another way to break down the financial markets. There are a number of motivations for a bullish insider to sell shares of his or her company, but just one, very clear reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this strategy if investors understand what to do (learn more here).

Consequently, let’s take a glance at the latest action encompassing Central Garden & Pet Co (NASDAQ:CENT).

How are hedge funds trading Central Garden & Pet Co (NASDAQ:CENT)?

At the end of the fourth quarter, a total of 6 of the hedge funds we track were bullish in this stock, a change of -14% from one quarter earlier. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes meaningfully.

When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the largest position in Central Garden & Pet Co (NASDAQ:CENT), worth close to $6.9 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which held a $6.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish include J. Carlo Cannell’s Cannell Capital, Jim Simons’s Renaissance Technologies and Andy Redleaf’s Whitebox Advisors.

Seeing as Central Garden & Pet Co (NASDAQ:CENT) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few fund managers who sold off their positions entirely heading into 2013. Interestingly, Michael Hintze’s CQS Cayman LP cut the biggest investment of the “upper crust” of funds we key on, worth about $2.2 million in stock. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into 2013.

Insider trading activity in Central Garden & Pet Co (NASDAQ:CENT)

Insider purchases made by high-level executives is particularly usable when the primary stock in question has experienced transactions within the past six months. Over the last half-year time period, Central Garden & Pet Co (NASDAQ:CENT) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Central Garden & Pet Co (NASDAQ:CENT). These stocks are Cal-Maine Foods Inc (NASDAQ:CALM), Dole Food Company, Inc. (NYSE:DOLE), Annies Inc (NYSE:BNNY), Amira Nature Foods Ltd (NYSE:ANFI), and ZHONGPIN INC. (NASDAQ:HOGS). This group of stocks are the members of the food – major diversified industry and their market caps are closest to CENT’s market cap.