Sims Metal Management Ltd (ADR) (NYSE:SMS) has seen an increase in enthusiasm from smart money in recent months.
In the eyes of most traders, hedge funds are viewed as slow, old investment vehicles of years past. While there are over 8000 funds in operation today, we look at the top tier of this group, around 450 funds. Most estimates calculate that this group has its hands on the majority of the smart money’s total capital, and by tracking their top picks, we have unearthed a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outpaced 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 topped the S&P 500 index by 24 percentage points in 7 months (see the details here).
Just as key, bullish insider trading activity is another way to parse down the financial markets. Just as you’d expect, there are lots of incentives for an executive to cut shares of his or her company, but just one, very obvious reason why they would buy. Many empirical studies have demonstrated the useful potential of this method if piggybackers know what to do (learn more here).
Consequently, we’re going to take a glance at the latest action surrounding Sims Metal Management Ltd (ADR) (NYSE:SMS).
How have hedgies been trading Sims Metal Management Ltd (ADR) (NYSE:SMS)?
At the end of the fourth quarter, a total of 6 of the hedge funds we track were bullish in this stock, a change of 50% from one quarter earlier. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their holdings significantly.
When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the biggest position in Sims Metal Management Ltd (ADR) (NYSE:SMS), worth close to $87.7 million, accounting for 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Lucas Capital Management, managed by Russell Lucas, which held a $0.7 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedgies that are bullish include Israel Englander’s Millennium Management, Jim Simons’s Renaissance Technologies and D. E. Shaw’s D E Shaw.
As one would reasonably expect, key money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, established the largest position in Sims Metal Management Ltd (ADR) (NYSE:SMS). Renaissance Technologies had 0.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.2 million investment in the stock during the quarter.
How have insiders been trading Sims Metal Management Ltd (ADR) (NYSE:SMS)?
Insider buying is most useful when the company in focus has seen transactions within the past half-year. Over the last half-year time frame, Sims Metal Management Ltd (ADR) (NYSE:SMS) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Sims Metal Management Ltd (ADR) (NYSE:SMS). These stocks are Allegheny Technologies Incorporated (NYSE:ATI), Mueller Industries, Inc. (NYSE:MLI), Carpenter Technology Corporation (NYSE:CRS), Chart Industries, Inc. (NASDAQ:GTLS), and Worthington Industries, Inc. (NYSE:WOR). All of these stocks are in the metal fabrication industry and their market caps match SMS’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Allegheny Technologies Incorporated (NYSE:ATI) | 19 | 1 | 2 |
| Mueller Industries, Inc. (NYSE:MLI) | 21 | 1 | 4 |
| Carpenter Technology Corporation (NYSE:CRS) | 18 | 1 | 6 |
| Chart Industries, Inc. (NASDAQ:GTLS) | 9 | 0 | 6 |
| Worthington Industries, Inc. (NYSE:WOR) | 7 | 0 | 5 |
With the returns demonstrated by our tactics, everyday investors should always monitor hedge fund and insider trading sentiment, and Sims Metal Management Ltd (ADR) (NYSE:SMS) is an important part of this process.
