Do Hedge Funds and Insiders Love RealD (RLD)?

Is it smart to be bullish on RealD (NYSE:RLD)?

If you were to ask many of your peers, hedge funds are assumed to be bloated, old financial tools of a period lost to current times. Although there are more than 8,000 hedge funds with their doors open currently, this site focuses on the masters of this club, around 525 funds. It is assumed that this group controls the majority of all hedge funds’ total capital, and by watching their highest performing picks, we’ve determined a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy beat 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 beaten the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as crucial, bullish insider trading activity is a second way to analyze the world of equities. Just as you’d expect, there are lots of incentives for an executive to drop shares of his or her company, but just one, very obvious reason why they would buy. Several empirical studies have demonstrated the market-beating potential of this strategy if “monkeys” understand what to do (learn more here).

Thus, it’s important to examine the newest info about RealD (NYSE:RLD).

What have hedge funds been doing with RealD (NYSE:RLD)?

In preparation for the third quarter, a total of 12 of the hedge funds we track were long in this stock, a change of -14% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully.

Out of the hedge funds we follow, Bares Capital Management, managed by Brian Bares, holds the most valuable position in RealD (NYSE:RLD). Bares Capital Management has a $82.1 million position in the stock, comprising 8% of its 13F portfolio. The second largest stake is held by Manatuck Hill Partners, managed by Mark Broach, which held a $34.3 million position; 4.2% of its 13F portfolio is allocated to the stock. Some other hedgies that hold long positions include Mario Gabelli’s GAMCO Investors, Edward Goodnow’s Goodnow Investment Group and D. E. Shaw’s D E Shaw.

As RealD (NYSE:RLD) has faced a fall in interest from upper-tier hedge fund managers, it’s safe to say that there was a specific group of fund managers that decided to sell off their full holdings last quarter. Intriguingly, Joseph A. Jolson’s Harvest Capital Strategies cut the biggest stake of the 450+ funds we key on, worth an estimated $19.9 million in stock, and Larry Foley and Paul Farrell of Bronson Point Partners was right behind this move, as the fund sold off about $6.9 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds last quarter.

How have insiders been trading RealD (NYSE:RLD)?

Insider buying made by high-level executives is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time frame, RealD (NYSE:RLD) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also review the relationship between both of these indicators in other stocks similar to RealD (NYSE:RLD). These stocks are Reading International, Inc. (NASDAQ:RDI), Regal Entertainment Group (NYSE:RGC), Rentrak Corporation (NASDAQ:RENT), Dreamworks Animation Skg Inc (NASDAQ:DWA), and Carmike Cinemas, Inc. (NASDAQ:CKEC). This group of stocks are in the movie production, theaters industry and their market caps match RLD’s market cap.

Using the results explained by our research, regular investors must always keep one eye on hedge fund and insider trading activity, and RealD (NYSE:RLD) applies perfectly to this mantra.

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