Do Hedge Funds and Insiders Love Rosetta Stone Inc (RST)?

Rosetta Stone Inc (NYSE:RST) was in 5 hedge funds’ portfolio at the end of the fourth quarter of 2012. RST has experienced an increase in hedge fund sentiment lately. There were 4 hedge funds in our database with RST holdings at the end of the previous quarter.

To the average investor, there are many methods investors can use to track the equity markets. Some of the best are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace the market by a healthy amount (see just how much).

Equally as beneficial, bullish insider trading activity is another way to break down the marketplace. Just as you’d expect, there are a variety of motivations for an insider to get rid of shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this strategy if “monkeys” know where to look (learn more here).

With these “truths” under our belt, it’s important to take a peek at the recent action encompassing Rosetta Stone Inc (NYSE:RST).

What have hedge funds been doing with Rosetta Stone Inc (NYSE:RST)?

Heading into 2013, a total of 5 of the hedge funds we track were long in this stock, a change of 25% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably.

When looking at the hedgies we track, Nierenberg Investment Management, managed by David Nierenberg, holds the largest position in Rosetta Stone Inc (NYSE:RST). Nierenberg Investment Management has a $22.3 million position in the stock, comprising 15.1% of its 13F portfolio. Sitting at the No. 2 spot is Ariel Investments, managed by John W. Rogers, which held a $4.1 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in Rosetta Stone Inc (NYSE:RST). Citadel Investment Group had 0.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.1 million investment in the stock during the quarter.

What do corporate executives and insiders think about Rosetta Stone Inc (NYSE:RST)?

Insider trading activity, especially when it’s bullish, is best served when the company in question has seen transactions within the past six months. Over the latest half-year time frame, Rosetta Stone Inc (NYSE:RST) has experienced 1 unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Rosetta Stone Inc (NYSE:RST). These stocks are Shanda Games Limited(ADR) (NASDAQ:GAME), Glu Mobile Inc. (NASDAQ:GLUU), Perfect World Co., Ltd. (ADR) (NASDAQ:PWRD), Avid Technology, Inc. (NASDAQ:AVID), and KongZhong Corporation (ADR) (NASDAQ:KONG). This group of stocks are the members of the multimedia & graphics software industry and their market caps are closest to RST’s market cap.

With the results demonstrated by the aforementioned research, retail investors should always watch hedge fund and insider trading activity, and Rosetta Stone Inc (NYSE:RST) is no exception.

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