Hedge Funds Are Buying Smith & Wesson Holding Corporation (SWHC)

Smith & Wesson Holding Corporation (NASDAQ:SWHC) was in 21 hedge funds’ portfolio at the end of the first quarter of 2013. SWHC has experienced an increase in hedge fund sentiment in recent months. There were 17 hedge funds in our database with SWHC holdings at the end of the previous quarter.

To most market participants, hedge funds are perceived as worthless, old financial vehicles of yesteryear. While there are over 8000 funds in operation today, we at Insider Monkey choose to focus on the bigwigs of this group, around 450 funds. It is widely believed that this group oversees most of all hedge funds’ total asset base, and by watching their highest performing stock picks, we have spotted a few investment strategies that have historically outstripped the broader indices. 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 began to 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 (see all of our picks from August).

Just as integral, bullish insider trading sentiment is another way to break down the financial markets. There are a variety of stimuli for an insider to drop shares of his or her company, but just one, very obvious reason why they would buy. Several academic studies have demonstrated the impressive potential of this tactic if investors know where to look (learn more here).

With these “truths” under our belt, it’s important to take a glance at the recent action regarding Smith & Wesson Holding Corporation (NASDAQ:SWHC).

What have hedge funds been doing with Smith & Wesson Holding Corporation (NASDAQ:SWHC)?

At Q1’s end, a total of 21 of the hedge funds we track held long positions in this stock, a change of 24% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly.

When looking at the hedgies we track, Highbridge Capital Management, managed by Glenn Russell Dubin, holds the biggest position in Smith & Wesson Holding Corporation (NASDAQ:SWHC). Highbridge Capital Management has a $4.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which held a $4.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions include Neil Chriss’s Hutchin Hill Capital, Gilchrist Berg’s Water Street Capital and Joel Greenblatt’s Gotham Asset Management.

As aggregate interest increased, some big names have jumped into Smith & Wesson Holding Corporation (NASDAQ:SWHC) headfirst. Highbridge Capital Management, managed by Glenn Russell Dubin, assembled the largest position in Smith & Wesson Holding Corporation (NASDAQ:SWHC). Highbridge Capital Management had 4.9 million invested in the company at the end of the quarter. Neil Chriss’s Hutchin Hill Capital also made a $3.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw, and David Costen Haley’s HBK Investments.

What have insiders been doing with Smith & Wesson Holding Corporation (NASDAQ:SWHC)?

Insider buying is particularly usable when the primary stock in question has experienced transactions within the past half-year. Over the latest half-year time frame, Smith & Wesson Holding Corporation (NASDAQ:SWHC) has seen 1 unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Smith & Wesson Holding Corporation (NASDAQ:SWHC). These stocks are Kaman Corporation (NYSE:KAMN), AeroVironment, Inc. (NASDAQ:AVAV), TASER International, Inc. (NASDAQ:TASR), Astronics Corporation (NASDAQ:ATRO), and AAR Corp. (NYSE:AIR). This group of stocks are in the aerospace/defense products & services industry and their market caps match SWHC’s market cap.