Hedge Funds Are Selling Imation Corp. (IMN)

Imation Corp. (NYSE:IMN) investors should pay attention to a decrease in hedge fund interest lately.

In the eyes of most traders, hedge funds are perceived as underperforming, old financial tools of the past. While there are greater than 8000 funds in operation at present, we at Insider Monkey hone in on the upper echelon of this club, around 450 funds. It is widely believed that this group has its hands on the majority of the hedge fund industry’s total asset base, and by tracking their highest performing investments, we have identified a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outperformed 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as integral, positive insider trading activity is a second way to parse down the stock market universe. There are lots of stimuli for an executive to sell shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this method if “monkeys” understand what to do (learn more here).

Now, let’s take a look at the key action regarding Imation Corp. (NYSE:IMN).

How have hedgies been trading Imation Corp. (NYSE:IMN)?

In preparation for this quarter, a total of 9 of the hedge funds we track were long in this stock, a change of -18% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully.

According to our comprehensive database, Ariel Investments, managed by John W. Rogers, holds the biggest position in Imation Corp. (NYSE:IMN). Ariel Investments has a $8.4 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Gregg J. Powers of Private Capital Management, with a $5.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include D. E. Shaw’s D E Shaw, Michael Price’s MFP Investors and Jim Simons’s Renaissance Technologies.

Judging by the fact that Imation Corp. (NYSE:IMN) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedge funds who were dropping their full holdings last quarter. It’s worth mentioning that Richard Rubin’s Hawkeye Capital dropped the largest stake of the “upper crust” of funds we key on, worth about $6 million in stock.. Cliff Asness’s fund, AQR Capital Management, also dumped its stock, about $0.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds last quarter.

Insider trading activity in Imation Corp. (NYSE:IMN)

Insider trading activity, especially when it’s bullish, is best served when the primary stock in question has experienced transactions within the past 180 days. Over the latest 180-day time period, Imation Corp. (NYSE:IMN) has seen 1 unique insiders purchasing, 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 Imation Corp. (NYSE:IMN). These stocks are Quantum Corp (NYSE:QTM), Xyratex Ltd. (NASDAQ:XRTX), Datalink Corporation (NASDAQ:DTLK), STEC, Inc. (NASDAQ:STEC), and OCZ Technology Group Inc. (NASDAQ:OCZ). This group of stocks are in the data storage devices industry and their market caps resemble IMN’s market cap.

With the results shown by the aforementioned studies, retail investors must always monitor hedge fund and insider trading activity, and Imation Corp. (NYSE:IMN) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds