If you’d ask most traders, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are greater than 8000 funds with their doors open at present, we look at the elite of this club, close to 450 funds. Most estimates calculate that this group oversees most of all hedge funds’ total asset base, and by paying attention to their top stock picks, we have deciphered a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year 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 (check out a sample of our picks).
Just as integral, optimistic insider trading activity is another way to parse down the financial markets. There are lots of stimuli for a corporate insider to get rid of shares of his or her company, but only one, very clear reason why they would behave bullishly. Various academic studies have demonstrated the impressive potential of this tactic if you understand what to do (learn more here).
Now, it’s important to take a look at the recent action surrounding LSI Industries, Inc. (NASDAQ:LYTS).
What does the smart money think about LSI Industries, Inc. (NASDAQ:LYTS)?
Heading into Q2, a total of 5 of the hedge funds we track were long in this stock, a change of 25% from the first quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings meaningfully.
According to our comprehensive database, Chuck Royce’s Royce & Associates had the largest position in LSI Industries, Inc. (NASDAQ:LYTS), worth close to $18.8 million, comprising 0.1% of its total 13F portfolio. Coming in second is Iridian Asset Management, managed by David Cohen and Harold Levy, which held a $0.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Ken Gray and Steve Walsh’s Bryn Mawr Capital and John Overdeck and David Siegel’s Two Sigma Advisors.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Bryn Mawr Capital, managed by Ken Gray and Steve Walsh, assembled the most outsized position in LSI Industries, Inc. (NASDAQ:LYTS). Bryn Mawr Capital had 0.2 million invested in the company at the end of the quarter.
What have insiders been doing with LSI Industries, Inc. (NASDAQ:LYTS)?
Insider trading activity, especially when it’s bullish, is most useful when the company in focus has experienced transactions within the past six months. Over the last half-year time frame, LSI Industries, Inc. (NASDAQ:LYTS) has seen zero unique insiders buying, 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 LSI Industries, Inc. (NASDAQ:LYTS). These stocks are Capstone Turbine Corporation (NASDAQ:CPST), JinkoSolar Holding Co., Ltd. (NYSE:JKS), Coleman Cable, Inc. (NASDAQ:CCIX), Exide Technologies (NASDAQ:XIDE), and Skullcandy Inc (NASDAQ:SKUL). This group of stocks belong to the industrial electrical equipment industry and their market caps resemble LYTS’s market cap.
