McGrath RentCorp (MGRC): Are Hedge Funds Right About This Stock?

Is McGrath RentCorp (NASDAQ:MGRC) a buy, sell, or hold? Investors who are in the know are becoming less hopeful. The number of bullish hedge fund positions decreased by 1 lately.

To most stock holders, hedge funds are assumed to be worthless, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at the moment, we hone in on the moguls of this club, around 450 funds. Most estimates calculate that this group oversees the majority of all hedge funds’ total capital, and by tracking their top equity investments, we have deciphered a few investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum 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 trumped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Equally as key, positive insider trading sentiment is a second way to parse down the marketplace. There are a variety of incentives for an upper level exec to sell shares of his or her company, but only one, very simple reason why they would buy. Several academic studies have demonstrated the valuable potential of this method if investors know what to do (learn more here).

With these “truths” under our belt, let’s take a look at the key action encompassing McGrath RentCorp (NASDAQ:MGRC).

How are hedge funds trading McGrath RentCorp (NASDAQ:MGRC)?

In preparation for this year, a total of 5 of the hedge funds we track were long in this stock, a change of -17% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially.

Of the funds we track, Chuck Royce’s Royce & Associates had the most valuable position in McGrath RentCorp (NASDAQ:MGRC), worth close to $8.5 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Dreman Value Management, managed by David Dreman, which held a $4.8 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedgies with similar optimism include Mario Gabelli’s GAMCO Investors, Cliff Asness’s AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Since McGrath RentCorp (NASDAQ:MGRC) has faced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few fund managers that slashed their full holdings at the end of the year. At the top of the heap, Scott Burney’s Bluefin Investment Management said goodbye to the biggest stake of all the hedgies we monitor, totaling an estimated $1.1 million in stock. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds at the end of the year.

What have insiders been doing with McGrath RentCorp (NASDAQ:MGRC)?

Insider buying is at its handiest when the company in focus has seen transactions within the past half-year. Over the latest six-month time period, McGrath RentCorp (NASDAQ:MGRC) has experienced zero unique insiders purchasing, and 11 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to McGrath RentCorp (NASDAQ:MGRC). These stocks are Electro Rent Corporation (NASDAQ:ELRC), Fly Leasing Ltd(ADR) (NYSE:FLY), seacube container leasing ltd (NYSE:BOX), CAI International Inc (NYSE:CAP), and Aircastle Limited (NYSE:AYR). This group of stocks are the members of the rental & leasing services industry and their market caps are closest to MGRC’s market cap.