Insteel Industries Inc (IIIN): Are Hedge Funds Right About This Stock?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Insteel Industries Inc (NASDAQ:IIIN) .

Insteel Industries Inc (NASDAQ:IIIN) investors should pay attention to a decrease in hedge fund sentiment of late. IIIN was in 16 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with IIIN positions at the end of the previous quarter. At the end of this article we will also compare IIIN to other stocks including First Potomac Realty Trust (NYSE:FPO), First Trust High Income Long/short Fund (NYSE:FSD), and Harsco Corporation (NYSE:HSC) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What does the smart money think about Insteel Industries Inc (NASDAQ:IIIN)?

Heading into the fourth quarter of 2016, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a fall of 16% from the second quarter of 2016. By comparison, 14 hedge funds held shares or bullish call options in IIIN heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Insteel Industries Inc (NASDAQ:IIIN), worth close to $17.7 million. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, which holds a $12.8 million position. Remaining professional money managers that are bullish consist of Jim Simons’ Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Paul Hondros’ AlphaOne Capital Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. Intriguingly, Peter Schliemann’s Rutabaga Capital Management got rid of the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $3.5 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund sold off about $0.4 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Insteel Industries Inc (NASDAQ:IIIN) but similarly valued. These stocks are First Potomac Realty Trust (NYSE:FPO), First Trust High Income Long/short Fund (NYSE:FSD), Harsco Corporation (NYSE:HSC), and Hemisphere Media Group Inc (NASDAQ:HMTV). This group of stocks’ market values are similar to IIIN’s market value.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $69 million in IIIN’s case. Harsco Corporation (NYSE:HSC) is the most popular stock in this table. On the other hand First Trust High Income Long/short Fund (NYSE:FSD) is the least popular one with only 3 bullish hedge fund positions. Insteel Industries Inc (NASDAQ:IIIN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HSC might be a better candidate to consider taking a long position in.

Disclosure: None