Quaker Chemical Corp (KWR): Are Hedge Funds Right About This Stock?

Quaker Chemical Corp (NYSE:KWR) has seen an increase in enthusiasm from smart money recently.

To most traders, hedge funds are perceived as worthless, outdated investment tools of the past. While there are over 8000 funds with their doors open at present, we hone in on the crème de la crème of this club, around 450 funds. It is widely believed that this group oversees most of the hedge fund industry’s total capital, and by watching their highest performing investments, we have unearthed a number of investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a 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 outpaced the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as important, bullish insider trading activity is a second way to break down the investments you’re interested in. Just as you’d expect, there are plenty of reasons for an executive to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Several academic studies have demonstrated the impressive potential of this method if you understand where to look (learn more here).

Now, we’re going to take a peek at the recent action surrounding Quaker Chemical Corp (NYSE:KWR).

Hedge fund activity in Quaker Chemical Corp (NYSE:KWR)

Heading into 2013, a total of 7 of the hedge funds we track were bullish in this stock, a change of 250% from the third quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially.

According to our comprehensive database, Chuck Royce’s Royce & Associates had the largest position in Quaker Chemical Corp (NYSE:KWR), worth close to $81 million, accounting for 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Richard Driehaus of Driehaus Capital, with a $1.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds that are bullish include Jim Simons’s Renaissance Technologies, Joel Greenblatt’s Gotham Asset Management and Mario Gabelli’s GAMCO Investors.

As aggregate interest increased, some big names have jumped into Quaker Chemical Corp (NYSE:KWR) headfirst. Driehaus Capital, managed by Richard Driehaus, initiated the largest position in Quaker Chemical Corp (NYSE:KWR). Driehaus Capital had 1.1 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $0.8 million position during the quarter. The other funds with brand new KWR positions are Joel Greenblatt’s Gotham Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Neil Chriss’s Hutchin Hill Capital.

How are insiders trading Quaker Chemical Corp (NYSE:KWR)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has experienced transactions within the past 180 days. Over the latest 180-day time period, Quaker Chemical Corp (NYSE:KWR) has seen zero unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Quaker Chemical Corp (NYSE:KWR). These stocks are Koppers Holdings Inc. (NYSE:KOP), WD-40 Company (NASDAQ:WDFC), Kraton Performance Polymers Inc (NYSE:KRA), OM Group, Inc. (NYSE:OMG), and Flotek Industries Inc (NYSE:FTK). This group of stocks are in the specialty chemicals industry and their market caps resemble KWR’s market cap.

With the returns demonstrated by the aforementioned studies, retail investors must always pay attention to hedge fund and insider trading activity, and Quaker Chemical Corp (NYSE:KWR) is an important part of this process.

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