Family Dollar Stores, Inc. (FDO): Here is What Hedge Funds and Insiders Think About It

Is Family Dollar Stores, Inc. (NYSE:FDO) a buy?

To the average investor, there are dozens of gauges shareholders can use to analyze the equity markets. A pair of the most useful are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite money managers can outclass the broader indices by a significant margin (see just how much).

Just as useful, optimistic insider trading activity is a second way to analyze the world of equities. There are lots of stimuli for a corporate insider to get rid of shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many empirical studies have demonstrated the valuable potential of this strategy if shareholders understand what to do (learn more here).

Keeping this in mind, we’re going to discuss the newest info surrounding Family Dollar Stores, Inc. (NYSE:FDO).

Hedge fund activity in Family Dollar Stores, Inc. (NYSE:FDO)

At the end of the second quarter, a total of 27 of the hedge funds we track were long in this stock, a change of 0% from the first quarter. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings substantially.

When using filings from the hedgies we track, Nelson Peltz’s Trian Partners had the largest position in Family Dollar Stores, Inc. (NYSE:FDO), worth close to $521.2 million, accounting for 10.3% of its total 13F portfolio. On Trian Partners’s heels is John Paulson of Paulson & Co, with a $463.8 million position; the fund has 3.3% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Natixis Global Asset Management’s Harris Associates, Jonathon Jacobson’s Highfields Capital Management and Lee Ainslie’s Maverick Capital.

As Family Dollar Stores, Inc. (NYSE:FDO) has experienced declining interest from the smart money’s best and brightest, it’s safe to say that there was a specific group of money managers that slashed their positions entirely heading into Q2. It’s worth mentioning that Ricky Sandler’s Eminence Capital dropped the largest position of the 450+ funds we track, comprising an estimated $56 million in stock, and Jim Simons of Renaissance Technologies was right behind this move, as the fund cut about $12.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What do corporate executives and insiders think about Family Dollar Stores, Inc. (NYSE:FDO)?

Bullish insider trading is particularly usable when the company in focus has experienced transactions within the past six months. Over the latest six-month time period, Family Dollar Stores, Inc. (NYSE:FDO) has experienced zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators 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). This group of stocks are in the discount, variety stores industry and their market caps resemble FDO’s market cap.

Using the results demonstrated by the previously mentioned analyses, regular investors must always pay attention to hedge fund and insider trading sentiment, and Family Dollar Stores, Inc. (NYSE:FDO) applies perfectly to this mantra.

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