FBR & Co (FBRC): Insiders Are Buying, Should You?

FBR & Co (NASDAQ:FBRC) shareholders have witnessed a decrease in hedge fund sentiment recently.

To most investors, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are greater than 8000 funds with their doors open at the moment, we choose to focus on the elite of this club, about 450 funds. It is widely believed that this group controls the lion’s share of all hedge funds’ total asset base, and by watching their highest performing investments, we have found a number of investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as important, optimistic insider trading sentiment is another way to parse down the stock market universe. Just as you’d expect, there are lots of incentives for a corporate insider to cut shares of his or her company, but just one, very clear reason why they would behave bullishly. Plenty of empirical studies have demonstrated the useful potential of this strategy if shareholders know where to look (learn more here).

With all of this in mind, let’s take a look at the recent action encompassing FBR & Co (NASDAQ:FBRC).

What have hedge funds been doing with FBR & Co (NASDAQ:FBRC)?

In preparation for this quarter, a total of 5 of the hedge funds we track held long positions in this stock, a change of -17% from the first quarter. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably.

According to our comprehensive database, Chuck Royce’s Royce & Associates had the biggest position in FBR & Co (NASDAQ:FBRC), worth close to $11.3 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which held a $1.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism include Jim Simons’s Renaissance Technologies, Ken Griffin’s Citadel Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors.

Due to the fact that FBR & Co (NASDAQ:FBRC) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of fund managers who sold off their entire stakes last quarter. Intriguingly, Chuck Royce’s Royce & Associates dumped the largest position of all the hedgies we monitor, totaling an estimated $9.7 million in stock. Michael Lowenstein’s fund, Kensico Capital, also dropped its stock, about $7.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds last quarter.

What do corporate executives and insiders think about FBR & Co (NASDAQ:FBRC)?

Bullish insider trading is particularly usable when the company we’re looking at has experienced transactions within the past half-year. Over the last 180-day time frame, FBR & Co (NASDAQ:FBRC) has experienced 1 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to FBR & Co (NASDAQ:FBRC). These stocks are Resource America Inc (NASDAQ:REXI), Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), Calamos Asset Management, Inc (NASDAQ:CLMS), Solar Senior Capital Ltd (NASDAQ:SUNS), and Manning and Napier Inc (NYSE:MN). This group of stocks are in the asset management industry and their market caps resemble FBRC’s market cap.