Do Hedge Funds and Insiders Love Family Dollar Stores, Inc. (FDO)?

Family Dollar Stores, Inc. (NYSE:FDO) was in 27 hedge funds’ portfolio at the end of the first quarter of 2013. FDO has experienced a decrease in hedge fund sentiment of late. There were 30 hedge funds in our database with FDO holdings at the end of the previous quarter.

If you’d ask most shareholders, hedge funds are seen as underperforming, outdated financial vehicles of the past. While there are more than 8000 funds in operation today, we at Insider Monkey hone in on the aristocrats of this club, around 450 funds. It is widely believed that this group controls most of the hedge fund industry’s total capital, and by monitoring their best picks, we have spotted a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as integral, optimistic insider trading sentiment is another way to parse down the stock market universe. Just as you’d expect, there are plenty of motivations for a bullish insider to downsize shares of his or her company, but just one, very obvious reason why they would buy. Plenty of academic studies have demonstrated the market-beating potential of this strategy if you know what to do (learn more here).

Now, it’s important to take a glance at the key action regarding Family Dollar Stores, Inc. (NYSE:FDO).

How are hedge funds trading Family Dollar Stores, Inc. (NYSE:FDO)?

At the end of the first quarter, a total of 27 of the hedge funds we track held long positions in this stock, a change of -10% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially.

When looking at the hedgies we track, Nelson Peltz’s Trian Partners had the biggest position in Family Dollar Stores, Inc. (NYSE:FDO), worth close to $529.6 million, comprising 11.3% of its total 13F portfolio. The second largest stake is held by John Paulson of Paulson & Co, with a $295.3 million position; 1.7% of its 13F portfolio is allocated to the stock. Some other hedge funds that hold long positions include Jonathon Jacobson’s Highfields Capital Management, Lee Ainslie’s Maverick Capital and Ricky Sandler’s Eminence Capital.

Due to the fact that Family Dollar Stores, Inc. (NYSE:FDO) has witnessed declining sentiment from the smart money, it’s easy to see that there exists a select few fund managers that elected to cut their positions entirely in Q1. Interestingly, Daniel S. Och’s OZ Management cut the largest investment of all the hedgies we track, worth about $104.5 million in stock.. Alan Fournier’s fund, Pennant Capital Management, also said goodbye to its stock, about $87.2 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds in Q1.

How are insiders trading Family Dollar Stores, Inc. (NYSE:FDO)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company we’re looking at has seen transactions within the past 180 days. Over the latest half-year time period, Family Dollar Stores, Inc. (NYSE:FDO) has experienced zero unique insiders buying, and 3 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Family Dollar Stores, Inc. (NYSE:FDO). These stocks are Target Corporation (NYSE:TGT), Big Lots, Inc. (NYSE:BIG), PriceSmart, Inc. (NASDAQ:PSMT), Dollar General Corp. (NYSE:DG), and Dollar Tree, Inc. (NASDAQ:DLTR). All of these stocks are in the discount, variety stores industry and their market caps are closest to FDO’s market cap.