Kaydon Corporation (KDN): Hedge Funds Are Bullish and Insiders Are Undecided, What Should You Do?

Is Kaydon Corporation (NYSE:KDN) a good investment?

To many traders, hedge funds are seen as bloated, outdated investment tools of a period lost to current times. Although there are over 8,000 hedge funds trading currently, this site aim at the top tier of this group, close to 525 funds. It is widely held that this group has its hands on most of the hedge fund industry’s total capital, and by monitoring their highest performing investments, we’ve figured out a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year 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 beaten the S&P 500 index by 33 percentage points in 11 months (find the details here).

Just as crucial, bullish insider trading sentiment is a second way to look at the stock market universe. There are many stimuli for a corporate insider to downsize shares of his or her company, but just one, very obvious reason why they would behave bullishly. Several academic studies have demonstrated the market-beating potential of this strategy if piggybackers know where to look (learn more here).

Thus, we’re going to study the newest info surrounding Kaydon Corporation (NYSE:KDN).

How are hedge funds trading Kaydon Corporation (NYSE:KDN)?

At the end of the second quarter, a total of 12 of the hedge funds we track were long in this stock, a change of 20% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially.

Out of the hedge funds we follow, Natixis Global Asset Management’s Harris Associates had the largest position in Kaydon Corporation (NYSE:KDN), worth close to $27.1 million, comprising 0.1% of its total 13F portfolio. On Harris Associates’s heels is Chuck Royce of Royce & Associates, with a $10.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions include Ken Griffin’s Citadel Investment Group, Jim Simons’s Renaissance Technologies and Joel Greenblatt’s Gotham Asset Management.

Now, particular hedge funds have jumped into Kaydon Corporation (NYSE:KDN) headfirst. Royce & Associates, managed by Chuck Royce, assembled the biggest position in Kaydon Corporation (NYSE:KDN). Royce & Associates had 10.7 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $4.2 million position during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies, Joel Greenblatt’s Gotham Asset Management, and Ric Dillon’s Diamond Hill Capital.

What have insiders been doing with Kaydon Corporation (NYSE:KDN)?

Insider buying is best served when the company in focus has experienced transactions within the past 180 days. Over the last six-month time period, Kaydon Corporation (NYSE:KDN) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Kaydon Corporation (NYSE:KDN). These stocks are MRC Global Inc (NYSE:MRC), Kennametal Inc. (NYSE:KMT), Proto Labs Inc (NYSE:PRLB), RBC Bearings Incorporated (NASDAQ:ROLL), and Blount International, Inc. (NYSE:BLT). This group of stocks are the members of the machine tools & accessories industry and their market caps match KDN’s market cap.

Using the returns explained by the previously mentioned studies, regular investors must always pay attention to hedge fund and insider trading sentiment, and Kaydon Corporation (NYSE:KDN) is no exception.

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