Here is What Hedge Funds Think About Brady Corp (BRC)

Brady Corp (NYSE:BRC) shareholders have witnessed an increase in hedge fund interest in recent months.

To most shareholders, hedge funds are viewed as slow, outdated financial tools of the past. While there are over 8000 funds in operation at the moment, we look at the leaders of this group, around 450 funds. Most estimates calculate that this group controls most of the hedge fund industry’s total capital, and by keeping an eye on their best investments, we have formulated 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 per annum 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 trumped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as integral, bullish insider trading sentiment is a second way to break down the financial markets. There are a variety of motivations for an insider to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this method if “monkeys” know what to do (learn more here).

Consequently, let’s take a peek at the key action surrounding Brady Corp (NYSE:BRC).

How are hedge funds trading Brady Corp (NYSE:BRC)?

In preparation for this quarter, a total of 14 of the hedge funds we track were bullish in this stock, a change of 8% from the first quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Brady Corp (NYSE:BRC). Royce & Associates has a $131.2 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Ariel Investments, managed by John W. Rogers, which held a $74.1 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include Richard S. Pzena’s Pzena Investment Management, David Dreman’s Dreman Value Management and Ken Griffin’s Citadel Investment Group.

As industrywide interest jumped, some big names have jumped into Brady Corp (NYSE:BRC) headfirst. Millennium Management, managed by Israel Englander, established the biggest position in Brady Corp (NYSE:BRC). Millennium Management had 0.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.2 million position during the quarter.

What do corporate executives and insiders think about Brady Corp (NYSE:BRC)?

Insider buying is at its handiest when the company in question has seen transactions within the past 180 days. Over the last 180-day time frame, Brady Corp (NYSE:BRC) has seen zero unique insiders buying, and 11 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Brady Corp (NYSE:BRC). These stocks are Intralinks Holdings Inc (NYSE:IL), KEYW Holding Corp. (NASDAQ:KEYW), AsiaInfo-Linkage, Inc. (NASDAQ:ASIA), Mantech International Corp (NASDAQ:MANT), and Sourcefire, Inc. (NASDAQ:FIRE). This group of stocks are in the security software & services industry and their market caps are closest to BRC’s market cap.

With the returns demonstrated by our strategies, retail investors must always pay attention to hedge fund and insider trading sentiment, and Brady Corp (NYSE:BRC) applies perfectly to this mantra.

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