Is Tellabs, Inc. (TLAB) Going to Burn These Hedge Funds?

Is Tellabs, Inc. (NASDAQ:TLAB) the right investment to pursue these days? Prominent investors are becoming less confident. The number of long hedge fund positions were cut by 2 lately.

In the 21st century investor’s toolkit, there are plenty of gauges market participants can use to monitor Mr. Market. A couple of the most innovative are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the best money managers can trounce their index-focused peers by a healthy amount (see just how much).

Equally as integral, positive insider trading activity is another way to parse down the world of equities. Just as you’d expect, there are a number of reasons for an insider to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this method if you know where to look (learn more here).

Now, let’s take a gander at the recent action encompassing Tellabs, Inc. (NASDAQ:TLAB).

How are hedge funds trading Tellabs, Inc. (NASDAQ:TLAB)?

At Q1’s end, a total of 14 of the hedge funds we track held long positions in this stock, a change of -13% from the first quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes significantly.

According to our comprehensive database, Martin Whitman’s Third Avenue Management had the largest position in Tellabs, Inc. (NASDAQ:TLAB), worth close to $74 million, comprising 1.4% of its total 13F portfolio. On Third Avenue Management’s heels is AQR Capital Management, managed by Cliff Asness, which held a $23.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedgies that are bullish include John Fichthorn’s Dialectic Capital Management, Chuck Royce’s Royce & Associates and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Because Tellabs, Inc. (NASDAQ:TLAB) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedge funds that slashed their entire stakes heading into Q2. Intriguingly, Andrew Weiss’s Weiss Asset Management dropped the largest investment of the “upper crust” of funds we track, totaling about $4.3 million in stock.. Jim Simons’s fund, Renaissance Technologies, also sold off its stock, about $0.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q2.

How have insiders been trading Tellabs, Inc. (NASDAQ:TLAB)?

Insider purchases made by high-level executives is best served when the primary stock in question has seen transactions within the past half-year. Over the last half-year time frame, Tellabs, Inc. (NASDAQ:TLAB) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Tellabs, Inc. (NASDAQ:TLAB). These stocks are 8×8, Inc. (NASDAQ:EGHT), Vocera Communications Inc (NYSE:VCRA), Harmonic Inc (NASDAQ:HLIT), Infinera Corp. (NASDAQ:INFN), and Sonus Networks, Inc. (NASDAQ:SONS). All of these stocks are in the communication equipment industry and their market caps resemble TLAB’s market cap.

With the results exhibited by Insider Monkey’s tactics, retail investors should always watch hedge fund and insider trading sentiment, and Tellabs, Inc. (NASDAQ:TLAB) shareholders fit into this picture quite nicely.

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