OpenTable Inc (OPEN): Hedge Funds and Insiders Are Bearish, What Should You Do?

OpenTable Inc (NASDAQ:OPEN) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately.

According to most shareholders, hedge funds are seen as underperforming, old financial tools of the past. While there are more than 8000 funds in operation today, we choose to focus on the bigwigs of this group, about 450 funds. Most estimates calculate that this group oversees the majority of the smart money’s total asset base, and by paying attention to their highest performing picks, we have unsheathed 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 topped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as beneficial, bullish insider trading activity is another way to break down the stock market universe. Just as you’d expect, there are many reasons for a bullish insider to get rid of shares of his or her company, but only one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the valuable potential of this tactic if piggybackers understand what to do (learn more here).

Keeping this in mind, it’s important to take a look at the recent action regarding OpenTable Inc (NASDAQ:OPEN).

What have hedge funds been doing with OpenTable Inc (NASDAQ:OPEN)?

Heading into Q2, a total of 15 of the hedge funds we track held long positions in this stock, a change of -21% from the first quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings considerably.

Of the funds we track, Cantillon Capital Management, managed by William von Mueffling, holds the most valuable position in OpenTable Inc (NASDAQ:OPEN). Cantillon Capital Management has a $67.1 million position in the stock, comprising 2.1% of its 13F portfolio. Coming in second is John Thaler of JAT Capital Management, with a $60.1 million position; 3% of its 13F portfolio is allocated to the company. Other peers that are bullish include Sanford J. Colen’s Apex Capital, Christopher R. Hansen’s Valiant Capital and Steven Cohen’s SAC Capital Advisors.

Judging by the fact that OpenTable Inc (NASDAQ:OPEN) has experienced declining sentiment from hedge fund managers, logic holds that there exists a select few money managers that decided to sell off their entire stakes last quarter. Interestingly, Robert Pitts’s Steadfast Capital Management cut the biggest position of all the hedgies we track, worth an estimated $35.9 million in stock., and Sanford J. Colen of Apex Capital was right behind this move, as the fund dumped about $19.7 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 4 funds last quarter.

What have insiders been doing with OpenTable Inc (NASDAQ:OPEN)?

Insider purchases made by high-level executives is at its handiest when the company in focus has seen transactions within the past 180 days. Over the latest six-month time frame, OpenTable Inc (NASDAQ:OPEN) has seen zero unique insiders buying, and 4 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to OpenTable Inc (NASDAQ:OPEN). These stocks are Bankrate Inc (NYSE:RATE), InterXion Holding NV (NYSE:INXN), Shutterfly, Inc. (NASDAQ:SFLY), Kayak Software Corp (NASDAQ:KYAK), and Yelp Inc (NYSE:YELP). This group of stocks are in the internet information providers industry and their market caps match OPEN’s market cap.

With the returns shown by the aforementioned time-tested strategies, retail investors must always pay attention to hedge fund and insider trading activity, and OpenTable Inc (NASDAQ:OPEN) applies perfectly to this mantra.

Click here to learn why you should track hedge funds