Imation Corp. (IMN): Insiders Are Dumping, Should You?: Quantum Corp (QTM), Xyratex Ltd. (XRTX)

Is Imation Corp. (NYSE:IMN) a bargain? Prominent investors are getting less bullish. The number of long hedge fund bets stayed the same which is a slightly negative development in our experience

To most shareholders, hedge funds are viewed as underperforming, outdated financial tools of years past. While there are over 8000 funds trading today, we at Insider Monkey choose to focus on the upper echelon of this club, about 450 funds. It is estimated that this group has its hands on the majority of the smart money’s total capital, and by tracking their top investments, we have found a number of 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Equally as key, positive insider trading sentiment is a second way to break down the world of equities. Just as you’d expect, there are lots of incentives for a bullish insider to cut shares of his or her company, but only one, very clear reason why they would buy. Plenty of academic studies have demonstrated the market-beating potential of this tactic if you understand where to look (learn more here).

Now, it’s important to take a gander at the key action regarding Imation Corp. (NYSE:IMN).

What does the smart money think about Imation Corp. (NYSE:IMN)?

At year’s end, a total of 11 of the hedge funds we track held long positions in this stock, a change of 0% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably.

Of the funds we track, Gregg J. Powers’s Private Capital Management had the biggest position in Imation Corp. (NYSE:IMN), worth close to $6 million, comprising 0.6% of its total 13F portfolio. The second largest stake is held by Richard Rubin of Hawkeye Capital, with a $6 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Some other peers that are bullish include Ryan Schaper’s Point Lobos Capital, John W. Rogers’s Ariel Investments and D. E. Shaw’s D E Shaw.

Because Imation Corp. (NYSE:IMN) has faced bearish sentiment from the smart money, we can see that there was a specific group of hedge funds that decided to sell off their entire stakes last quarter. Intriguingly, Chuck Royce’s Royce & Associates sold off the biggest position of the 450+ funds we key on, totaling an estimated $0 million in stock., and Peter Algert and Kevin Coldiron of Algert Coldiron Investors was right behind this move, as the fund dropped about $0 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

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

Insider purchases made by high-level executives is most useful when the primary stock in question has experienced transactions within the past half-year. Over the last 180-day time frame, Imation Corp. (NYSE:IMN) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s go over 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 belong to the data storage devices industry and their market caps are similar to IMN’s market cap.

With the results shown by the aforementioned tactics, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Imation Corp. (NYSE:IMN) applies perfectly to this mantra.

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Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.