Ferro Corporation (FOE): Insiders Aren’t Crazy About It

Is Ferro Corporation (NYSE:FOE) a healthy stock for your portfolio? Money managers are in an optimistic mood. The number of bullish hedge fund positions moved up by 2 lately.

According to most shareholders, hedge funds are seen as underperforming, outdated investment tools of years past. While there are over 8000 funds trading today, we at Insider Monkey look at the elite of this group, around 450 funds. It is widely believed that this group oversees the majority of all hedge funds’ total capital, and by paying attention to their highest performing picks, we have formulated a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually 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 outpaced the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as important, bullish insider trading activity is a second way to parse down the financial markets. Obviously, there are lots of motivations for an insider to drop shares of his or her company, but just one, very clear reason why they would behave bullishly. Several academic studies have demonstrated the useful potential of this method if you understand what to do (learn more here).

Now, let’s take a gander at the recent action encompassing Ferro Corporation (NYSE:FOE).

What does the smart money think about Ferro Corporation (NYSE:FOE)?

Heading into Q2, a total of 21 of the hedge funds we track were long in this stock, a change of 11% from the first quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully.

According to our comprehensive database, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Ferro Corporation (NYSE:FOE). GAMCO Investors has a $56.4 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Brigade Capital, managed by Don Morgan, which held a $31.3 million position; 2.1% of its 13F portfolio is allocated to the company. Remaining hedge funds that hold long positions include Jeffrey Smith’s Starboard Value LP, Stephen Loukas, David A. Lorber, Zachary George’s FrontFour Capital Group and Douglas Hirsch’s Seneca Capital.

Now, specific money managers were breaking ground themselves. Starboard Value LP, managed by Jeffrey Smith, initiated the biggest position in Ferro Corporation (NYSE:FOE). Starboard Value LP had 28.9 million invested in the company at the end of the quarter. Douglas Hirsch’s Seneca Capital also made a $13.7 million investment in the stock during the quarter. The other funds with brand new FOE positions are Daniel S. Och’s OZ Management, Matthew Hulsizer’s PEAK6 Capital Management, and Matthew Halbower’s Pentwater Capital Management.

How are insiders trading Ferro Corporation (NYSE:FOE)?

Insider buying is most useful when the company we’re looking at has experienced transactions within the past half-year. Over the last six-month time period, Ferro Corporation (NYSE:FOE) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Ferro Corporation (NYSE:FOE). These stocks are WD-40 Company (NASDAQ:WDFC), Flotek Industries Inc (NYSE:FTK), Quaker Chemical Corp (NYSE:KWR), OM Group, Inc. (NYSE:OMG), and Kraton Performance Polymers Inc (NYSE:KRA). This group of stocks belong to the specialty chemicals industry and their market caps match FOE’s market cap.

With the results exhibited by our strategies, retail investors should always monitor hedge fund and insider trading activity, and Ferro Corporation (NYSE:FOE) is an important part of this process.

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