Edgen Group Inc (EDG): Hedge Funds Are Bearish and Insiders Are Undecided, What Should You Do?

Should Edgen Group Inc (NYSE:EDG) investors track the following data?

To many of your fellow readers, hedge funds are assumed to be useless, outdated financial tools of a forgotten age. Although there are over 8,000 hedge funds in operation today, Insider Monkey focuses on the aristocrats of this group, close to 525 funds. It is assumed that this group has its hands on the majority of all hedge funds’ total assets, and by keeping an eye on their highest quality stock picks, we’ve brought to light a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a 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 (see all of our picks from August).

Equally as crucial, positive insider trading sentiment is a second way to look at the financial markets. Just as you’d expect, there are lots of incentives for a bullish insider to drop shares of his or her company, but just one, very obvious reason why they would buy. Various empirical studies have demonstrated the valuable potential of this strategy if investors understand where to look (learn more here).

What’s more, let’s discuss the latest info about Edgen Group Inc (NYSE:EDG).

How have hedgies been trading Edgen Group Inc (NYSE:EDG)?

Heading into Q3, a total of 6 of the hedge funds we track were long in this stock, a change of -25% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings meaningfully.

When using filings from the hedgies we track, Kingdon Capital, managed by Mark Kingdon, holds the biggest position in Edgen Group Inc (NYSE:EDG). Kingdon Capital has a $3.8 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Richard Driehaus of Driehaus Capital, with a $3.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include Brian Taylor’s Pine River Capital Management, Israel Englander’s Millennium Management and D. E. Shaw’s D E Shaw.

Judging by the fact that Edgen Group Inc (NYSE:EDG) has experienced dropping sentiment from the smart money’s best and brightest, it’s safe to say that there exists a select few hedgies who were dropping their full holdings last quarter. Intriguingly, John Burbank’s Passport Capital cut the largest investment of all the hedgies we monitor, totaling about $7.3 million in stock, and Ryan Schaper of Point Lobos Capital was right behind this move, as the fund dropped about $3.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.

What do corporate executives and insiders think about Edgen Group Inc (NYSE:EDG)?

Legal insider trading, particularly when it’s bullish, is most useful when the company in focus has experienced transactions within the past half-year. Over the latest half-year time period, Edgen Group Inc (NYSE:EDG) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Edgen Group Inc (NYSE:EDG). These stocks are RTI International Metals, Inc. (NYSE:RTI), Susser Petroleum Partners LP (NYSE:SUSP), Newport Corporation (NASDAQ:NEWP), Lawson Products, Inc. (NASDAQ:LAWS), and Houston Wire & Cable Company (NASDAQ:HWCC). This group of stocks are the members of the industrial equipment wholesale industry and their market caps resemble EDG’s market cap.

Using the returns explained by Insider Monkey’s strategies, average investors should always track hedge fund and insider trading sentiment, and Edgen Group Inc (NYSE:EDG) is no exception.

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