Is Twin Disc, Incorporated (TWIN) Going to Burn These Hedge Funds?

Is Twin Disc, Incorporated (NASDAQ:TWIN) a buy, sell, or hold? Prominent investors are getting less optimistic. The number of bullish hedge fund positions stayed the same which is a slightly negative development in our experience

In the eyes of most shareholders, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are greater than 8000 funds trading today, we choose to focus on the aristocrats of this group, around 450 funds. It is estimated that this group controls the majority of all hedge funds’ total asset base, and by keeping an eye on their top equity investments, we have spotted a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 outperformed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as important, positive insider trading sentiment is another way to break down the investments you’re interested in. There are lots of stimuli for a corporate insider to sell shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of empirical studies have demonstrated the impressive potential of this method if piggybackers know what to do (learn more here).

Consequently, it’s important to take a glance at the latest action encompassing Twin Disc, Incorporated (NASDAQ:TWIN).

What have hedge funds been doing with Twin Disc, Incorporated (NASDAQ:TWIN)?

Heading into 2013, a total of 5 of the hedge funds we track were bullish in this stock, a change of 0% from the third quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully.

When looking at the hedgies we track, Mario Gabelli’s GAMCO Investors had the biggest position in Twin Disc, Incorporated (NASDAQ:TWIN), worth close to $12.2 million, comprising 0.1% of its total 13F portfolio. On GAMCO Investors’s heels is Gregory Fraser, Rudolph Kluiber, and Timothy Kroch of GRT Capital Partners, with a $1.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, D. E. Shaw’s D E Shaw and Jim Simons’s Renaissance Technologies.

Seeing as Twin Disc, Incorporated (NASDAQ:TWIN) has experienced declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of funds that elected to cut their positions entirely at the end of the year. At the top of the heap, Israel Englander’s Millennium Management dropped the largest position of all the hedgies we key on, comprising an estimated $0.3 million in stock. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

What do corporate executives and insiders think about Twin Disc, Incorporated (NASDAQ:TWIN)?

Insider trading activity, especially when it’s bullish, is best served when the primary stock in question has seen transactions within the past six months. Over the last half-year time frame, Twin Disc, Incorporated (NASDAQ:TWIN) has experienced 1 unique insiders buying, 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 Twin Disc, Incorporated (NASDAQ:TWIN). These stocks are Flow International Corporation (NASDAQ:FLOW), Ampco-Pittsburgh Corp. (NYSE:AP), Global Power Equipment Group Inc (NASDAQ:GLPW), Kadant Inc. (NYSE:KAI), and Marine Products Corp. (NYSE:MPX). This group of stocks are in the diversified machinery industry and their market caps resemble TWIN’s market cap.

With the results demonstrated by the aforementioned time-tested strategies, retail investors should always monitor hedge fund and insider trading sentiment, and Twin Disc, Incorporated (NASDAQ:TWIN) is no exception.

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