Is Skullcandy Inc (SKUL) Going to Burn These Hedge Funds?

Skullcandy Inc (NASDAQ:SKUL) investors should be aware of a decrease in support from the world’s most elite money managers in recent months.

In the eyes of most market participants, hedge funds are assumed to be underperforming, old financial vehicles of years past. While there are over 8000 funds with their doors open at the moment, we look at the top tier of this group, around 450 funds. It is widely believed that this group has its hands on the majority of the smart money’s total asset base, and by watching their top investments, we have formulated a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outstripped 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as beneficial, positive insider trading activity is another way to parse down the financial markets. Just as you’d expect, there are a number of reasons for a corporate insider to cut shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Many empirical studies have demonstrated the useful potential of this tactic if you understand what to do (learn more here).

With these “truths” under our belt, it’s important to take a gander at the key action surrounding Skullcandy Inc (NASDAQ:SKUL).

What does the smart money think about Skullcandy Inc (NASDAQ:SKUL)?

At Q1’s end, a total of 8 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the largest position in Skullcandy Inc (NASDAQ:SKUL). Royce & Associates has a $4.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Marathon Partners, managed by Mario Cibelli, which held a $3.3 million position; 2% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism include Jim Simons’s Renaissance Technologies, Whitney Tilson’s T2 Partners and Zeke Ashton’s Centaur Capital Partners.

Judging by the fact that Skullcandy Inc (NASDAQ:SKUL) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers that slashed their full holdings last quarter. It’s worth mentioning that Joel Ramin’s 12 West Capital Management sold off the largest position of all the hedgies we track, comprising about $4.5 million in stock.. Peter S. Park’s fund, Park West Asset Management, also dumped its stock, about $0.4 million worth. These transactions 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 Skullcandy Inc (NASDAQ:SKUL)

Insider buying is best served when the company in focus has seen transactions within the past half-year. Over the latest 180-day time period, Skullcandy Inc (NASDAQ:SKUL) has seen 3 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Skullcandy Inc (NASDAQ:SKUL). These stocks are Research Frontiers, Inc. (NASDAQ:REFR), Ballard Power Systems Inc. (USA) (NASDAQ:BLDP), Exide Technologies (NASDAQ:XIDE), JinkoSolar Holding Co., Ltd. (NYSE:JKS), and LSI Industries, Inc. (NASDAQ:LYTS). This group of stocks belong to the industrial electrical equipment industry and their market caps match SKUL’s market cap.

With the returns shown by our tactics, retail investors must always pay attention to hedge fund and insider trading activity, and Skullcandy Inc (NASDAQ:SKUL) applies perfectly to this mantra.

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