Globe Specialty Metals, Inc. (GSM): Hedge Funds and Insiders Are Bearish, What Should You Do? – U.S. Silica Holdings Inc (SLCA), AMCOL International Corporation (ACO)

Globe Specialty Metals, Inc. (NASDAQ:GSM) investors should be aware of a decrease in hedge fund interest lately.

If you’d ask most traders, hedge funds are seen as slow, outdated investment vehicles of the past. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey look at the aristocrats of this club, around 450 funds. It is estimated that this group oversees most of the hedge fund industry’s total asset base, and by tracking their best stock picks, we have unsheathed a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outperformed 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 trumped the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Equally as beneficial, positive insider trading activity is a second way to break down the investments you’re interested in. As the old adage goes: there are lots of stimuli for an executive to get rid of shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Various empirical studies have demonstrated the impressive potential of this strategy if shareholders know what to do (learn more here).

Now, it’s important to take a peek at the recent action encompassing Globe Specialty Metals, Inc. (NASDAQ:GSM).

How have hedgies been trading Globe Specialty Metals, Inc. (NASDAQ:GSM)?

At the end of the fourth quarter, a total of 10 of the hedge funds we track were bullish in this stock, a change of -23% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably.

Of the funds we track, Chuck Royce’s Royce & Associates had the largest position in Globe Specialty Metals, Inc. (NASDAQ:GSM), worth close to $137 million, comprising 0.4% of its total 13F portfolio. The second largest stake is held by Corsair Capital Management, managed by Jay Petschek and Steven Major, which held a $20 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Clifton S. Robbins’s Blue Harbour Group, Richard Chilton’s Chilton Investment Company and Israel Englander’s Millennium Management.

Seeing as Globe Specialty Metals, Inc. (NASDAQ:GSM) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies who were dropping their positions entirely heading into 2013. Intriguingly, Meryl Witmer’s Eagle Value Partners dropped the biggest position of the “upper crust” of funds we track, worth close to $6 million in stock.. Richard Driehaus’s fund, Driehaus Capital, also sold off its stock, about $5 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds heading into 2013.

How have insiders been trading Globe Specialty Metals, Inc. (NASDAQ:GSM)?

Insider purchases made by high-level executives is best served when the company we’re looking at has seen transactions within the past half-year. Over the last six-month time period, Globe Specialty Metals, Inc. (NASDAQ:GSM) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Globe Specialty Metals, Inc. (NASDAQ:GSM). These stocks are Stillwater Mining Company (NYSE:SWC), U.S. Silica Holdings Inc (NYSE:SLCA), Arch Coal Inc (NYSE:ACI), Cloud Peak Energy Inc. (NYSE:CLD), and AMCOL International Corporation (NYSE:ACO). This group of stocks are the members of the industrial metals & minerals industry and their market caps are closest to GSM’s market cap.

With the returns demonstrated by our studies, retail investors should always monitor hedge fund and insider trading sentiment, and Globe Specialty Metals, Inc. (NASDAQ:GSM) applies perfectly to this mantra.

Click here to learn why you should track hedge funds