Hedge Funds Are Betting On West Marine, Inc. (WMAR)

West Marine, Inc. (NASDAQ:WMAR) investors should be aware of an increase in enthusiasm from smart money of late.

In the eyes of most market participants, hedge funds are perceived as worthless, old financial tools of the past. While there are over 8000 funds in operation today, we at Insider Monkey choose to focus on the upper echelon of this group, about 450 funds. Most estimates calculate that this group controls the majority of all hedge funds’ total capital, and by monitoring their highest performing equity investments, we have unearthed a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as beneficial, positive insider trading activity is a second way to break down the investments you’re interested in. Obviously, there are many stimuli for a bullish insider to get rid of shares of his or her company, but just one, very clear reason why they would initiate a purchase. Many academic studies have demonstrated the valuable potential of this method if you understand where to look (learn more here).

Keeping this in mind, we’re going to take a glance at the key action surrounding West Marine, Inc. (NASDAQ:WMAR).

What does the smart money think about West Marine, Inc. (NASDAQ:WMAR)?

In preparation for this quarter, a total of 10 of the hedge funds we track were long in this stock, a change of 25% from the first quarter.

Consequently, specific money managers were leading the bulls’ herd. Becker Drapkin Management, managed by Matthew Drapkin and Steven R. Becker, established the largest position in West Marine, Inc. (NASDAQ:WMAR). Becker Drapkin Management had 0.4 million invested in the company at the end of the quarter. Ken Gray and Steve Walsh’s Bryn Mawr Capital also initiated a $0.3 million position during the quarter.

How are insiders trading West Marine, Inc. (NASDAQ:WMAR)?

Bullish insider trading is most useful when the company in focus has experienced transactions within the past half-year. Over the last half-year time frame, West Marine, Inc. (NASDAQ:WMAR) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to West Marine, Inc. (NASDAQ:WMAR). These stocks are Winmark Corporation (NASDAQ:WINA), CSS Industries, Inc. (NYSE:CSS), Odyssey Marine Exploration Inc (NASDAQ:OMEX), TravelCenters of America LLC (NYSEAMEX:TA), and XO Group Inc (NYSE:XOXO). All of these stocks are in the specialty retail, other industry and their market caps resemble WMAR’s market cap.

With the returns demonstrated by the aforementioned strategies, everyday investors must always watch hedge fund and insider trading sentiment, and West Marine, Inc. (NASDAQ:WMAR) shareholders fit into this picture quite nicely.

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