Douglas Dynamics Inc (NYSE:PLOW) investors should be aware of a decrease in activity from the world’s largest hedge funds of late.
According to most shareholders, hedge funds are viewed as worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at present, we look at the aristocrats of this group, around 450 funds. Most estimates calculate that this group oversees most of all hedge funds’ total capital, and by tracking their best stock picks, we have revealed a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outstripped 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 outclassed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Just as key, optimistic insider trading sentiment is another way to parse down the marketplace. Just as you’d expect, there are lots of stimuli for an executive to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this strategy if piggybackers know what to do (learn more here).
With these “truths” under our belt, let’s take a gander at the recent action surrounding Douglas Dynamics Inc (NYSE:PLOW).
Hedge fund activity in Douglas Dynamics Inc (NYSE:PLOW)
At year’s end, a total of 6 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially.
Of the funds we track, Chuck Royce’s Royce & Associates had the largest position in Douglas Dynamics Inc (NYSE:PLOW), worth close to $0.7 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedgies that are bullish include Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and Gregory Fraser, Rudolph Kluiber, and Timothy Kroch’s GRT Capital Partners.
Judging by the fact that Douglas Dynamics Inc (NYSE:PLOW) has experienced falling interest from the smart money, it’s safe to say that there is a sect of money managers that decided to sell off their positions entirely heading into 2013. At the top of the heap, J. Carlo Cannell’s Cannell Capital cut the largest position of the 450+ funds we watch, valued at an estimated $2 million in stock., and John Burbank of Passport Capital was right behind this move, as the fund sold off about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
How have insiders been trading Douglas Dynamics Inc (NYSE:PLOW)?
Insider purchases made by high-level executives is most useful when the company we’re looking at has experienced transactions within the past 180 days. Over the latest 180-day time frame, Douglas Dynamics Inc (NYSE:PLOW) has experienced zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Douglas Dynamics Inc (NYSE:PLOW). These stocks are Superior Industries International Inc. (NYSE:SUP), Meritor Inc (NYSE:MTOR), Stoneridge, Inc. (NYSE:SRI), Modine Manufacturing Co. (NYSE:MOD), and Fuel Systems Solutions, Inc. (NASDAQ:FSYS). This group of stocks are in the auto parts industry and their market caps match PLOW’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Superior Industries International Inc. (NYSE:SUP) | 10 | 0 | 4 |
| Meritor Inc (NYSE:MTOR) | 20 | 0 | 6 |
| Stoneridge, Inc. (NYSE:SRI) | 8 | 2 | 0 |
| Modine Manufacturing Co. (NYSE:MOD) | 6 | 0 | 0 |
| Fuel Systems Solutions, Inc. (NASDAQ:FSYS) | 4 | 1 | 0 |
With the returns exhibited by our studies, retail investors should always watch hedge fund and insider trading sentiment, and Douglas Dynamics Inc (NYSE:PLOW) applies perfectly to this mantra.
