PetSmart, Inc. (PETM): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

PetSmart, Inc. (NASDAQ:PETM) was in 23 hedge funds’ portfolio at the end of March. PETM has experienced an increase in enthusiasm from smart money recently. There were 22 hedge funds in our database with PETM holdings at the end of the previous quarter.

In today’s marketplace, there are plenty of indicators investors can use to track their holdings. A pair of the most under-the-radar are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the top money managers can outclass the S&P 500 by a significant margin (see just how much).

Just as important, positive insider trading sentiment is a second way to parse down the marketplace. As the old adage goes: there are a variety of incentives for a bullish insider to downsize shares of his or her company, but just one, very clear reason why they would buy. Many academic studies have demonstrated the useful potential of this tactic if you understand what to do (learn more here).

Keeping this in mind, it’s important to take a look at the recent action encompassing PetSmart, Inc. (NASDAQ:PETM).

What have hedge funds been doing with PetSmart, Inc. (NASDAQ:PETM)?

Heading into Q2, a total of 23 of the hedge funds we track were long in this stock, a change of 5% from the first quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes substantially.

Of the funds we track, Longview Asset Management, managed by James A. Star, holds the most valuable position in PetSmart, Inc. (NASDAQ:PETM). Longview Asset Management has a $413.1 million position in the stock, comprising 13.9% of its 13F portfolio. The second largest stake is held by SAC Capital Advisors, managed by Steven Cohen, which held a $108.4 million position; 0.5% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Jim Simons’s Renaissance Technologies, Ken Griffin’s Citadel Investment Group and Cliff Asness’s AQR Capital Management.

Consequently, key hedge funds were leading the bulls’ herd. First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, initiated the largest position in PetSmart, Inc. (NASDAQ:PETM). First Pacific Advisors LLC had 26.6 million invested in the company at the end of the quarter. SAC Subsidiary’s CR Intrinsic Investors also made a $18 million investment in the stock during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Israel Englander’s Catapult Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.

How are insiders trading PetSmart, Inc. (NASDAQ:PETM)?

Insider buying is at its handiest when the company in focus has seen transactions within the past six months. Over the last half-year time frame, PetSmart, Inc. (NASDAQ:PETM) has seen zero unique insiders purchasing, and 12 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to PetSmart, Inc. (NASDAQ:PETM). These stocks are HSN, Inc. (NASDAQ:HSNI), Staples, Inc. (NASDAQ:SPLS), Sally Beauty Holdings, Inc. (NYSE:SBH), and Tractor Supply Company (NASDAQ:TSCO). This group of stocks are in the specialty retail, other industry and their market caps are closest to PETM’s market cap.