Hedge Funds Aren’t Crazy About Methode Electronics Inc. (MEI) Anymore

Methode Electronics Inc. (NYSE:MEI) was in 6 hedge funds’ portfolio at the end of the fourth quarter of 2012. MEI has experienced a decrease in hedge fund sentiment of late. There were 7 hedge funds in our database with MEI holdings at the end of the previous quarter.

To the average investor, there are plenty of methods shareholders can use to watch publicly traded companies. A duo of the most under-the-radar are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the market by a superb amount (see just how much).

Just as key, bullish insider trading activity is another way to break down the stock market universe. Just as you’d expect, there are plenty of motivations for an insider to cut shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several academic studies have demonstrated the useful potential of this strategy if piggybackers understand what to do (learn more here).

With these “truths” under our belt, let’s take a peek at the key action encompassing Methode Electronics Inc. (NYSE:MEI).

What does the smart money think about Methode Electronics Inc. (NYSE:MEI)?

Heading into 2013, a total of 6 of the hedge funds we track held long positions in this stock, a change of -14% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully.

When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the biggest position in Methode Electronics Inc. (NYSE:MEI), worth close to $15.6 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Mario Gabelli of GAMCO Investors, with a $2.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedgies that are bullish include D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium Management.

Because Methode Electronics Inc. (NYSE:MEI) has experienced a declination in interest from the smart money, logic holds that there lies a certain “tier” of fund managers that decided to sell off their positions entirely in Q4. Intriguingly, Mike Vranos’s Ellington dropped the largest investment of all the hedgies we track, comprising an estimated $0.2 million in stock. These moves are interesting, as total hedge fund interest dropped by 1 funds in Q4.

How have insiders been trading Methode Electronics Inc. (NYSE:MEI)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company we’re looking at has seen transactions within the past 180 days. Over the latest six-month time period, Methode Electronics Inc. (NYSE:MEI) has seen 3 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Methode Electronics Inc. (NYSE:MEI). These stocks are CTS Corporation (NYSE:CTS), Nam Tai Electronics, Inc. (NYSE:NTE), Silicon Motion Technology Corp. (ADR) (NASDAQ:SIMO), Orbotech Ltd. (NASDAQ:ORBK), and Power One Inc (NASDAQ:PWER). This group of stocks belong to the diversified electronics industry and their market caps match MEI’s market cap.

With the returns demonstrated by Insider Monkey’s time-tested strategies, retail investors should always pay attention to hedge fund and insider trading activity, and Methode Electronics Inc. (NYSE:MEI) is an important part of this process.

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