Electro Rent Corporation (ELRC): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Is Electro Rent Corporation (NASDAQ:ELRC) a healthy stock for your portfolio? The best stock pickers are in a bullish mood. The number of long hedge fund positions inched up by 1 in recent months.

According to most stock holders, hedge funds are seen as slow, outdated investment vehicles of years past. While there are over 8000 funds trading at the moment, we look at the upper echelon of this club, close to 450 funds. Most estimates calculate that this group has its hands on the majority of all hedge funds’ total asset base, and by keeping an eye on their top equity investments, we have spotted a number of investment strategies that have historically outpaced 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 began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Just as important, optimistic insider trading activity is a second way to parse down the stock market universe. As the old adage goes: there are plenty of stimuli for an upper level exec to downsize shares of his or her company, but only one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this tactic if “monkeys” understand where to look (learn more here).

Keeping this in mind, it’s important to take a gander at the key action encompassing Electro Rent Corporation (NASDAQ:ELRC).

How have hedgies been trading Electro Rent Corporation (NASDAQ:ELRC)?

At year’s end, a total of 5 of the hedge funds we track were long in this stock, a change of 25% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the biggest position in Electro Rent Corporation (NASDAQ:ELRC). Royce & Associates has a $7.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Private Capital Management, managed by Gregg J. Powers, which held a $6.9 million position; 0.7% of its 13F portfolio is allocated to the stock. Some other hedgies that hold long positions include Jim Simons’s Renaissance Technologies, Jean-Marie Eveillard’s First Eagle Investment Management and Israel Englander’s Millennium Management.

Now, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the largest position in Electro Rent Corporation (NASDAQ:ELRC). Millennium Management had 0.2 million invested in the company at the end of the quarter.

What have insiders been doing with Electro Rent Corporation (NASDAQ:ELRC)?

Insider purchases made by high-level executives is best served when the company in question has experienced transactions within the past six months. Over the latest 180-day time period, Electro Rent Corporation (NASDAQ:ELRC) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Electro Rent Corporation (NASDAQ:ELRC). These stocks are Aircastle Limited (NYSE:AYR), McGrath RentCorp (NASDAQ:MGRC), CAI International Inc (NYSE:CAP), seacube container leasing ltd (NYSE:BOX), and Fly Leasing Ltd(ADR) (NYSE:FLY). This group of stocks are in the rental & leasing services industry and their market caps are closest to ELRC’s market cap.