Richardson Electronics, Ltd. (RELL): Are Hedge Funds Right About This Stock?

Richardson Electronics, Ltd. (NASDAQ:RELL) investors should be aware of a decrease in enthusiasm from smart money recently.

To most investors, hedge funds are seen as worthless, outdated investment tools of yesteryear. While there are more than 8000 funds in operation today, we at Insider Monkey choose to focus on the masters of this group, close to 450 funds. It is estimated that this group oversees the lion’s share of the smart money’s total asset base, and by keeping an eye on their top investments, we have uncovered a number of investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy beat 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 outpaced the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as beneficial, optimistic insider trading sentiment is a second way to parse down the world of equities. Just as you’d expect, there are a variety of reasons for an upper level exec to cut shares of his or her company, but only one, very obvious reason why they would behave bullishly. Various empirical studies have demonstrated the impressive potential of this tactic if you know where to look (learn more here).

Consequently, it’s important to take a peek at the key action encompassing Richardson Electronics, Ltd. (NASDAQ:RELL).

How are hedge funds trading Richardson Electronics, Ltd. (NASDAQ:RELL)?

At Q1’s end, a total of 7 of the hedge funds we track were long in this stock, a change of -22% from the first quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably.

Of the funds we track, Gates Capital Management, managed by Jeffrey Gates, holds the biggest position in Richardson Electronics, Ltd. (NASDAQ:RELL). Gates Capital Management has a $25.3 million position in the stock, comprising 1.3% of its 13F portfolio. The second largest stake is held by Royce & Associates, managed by Chuck Royce, which held a $8.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Jim Simons’s Renaissance Technologies, J. Carlo Cannell’s Cannell Capital and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners.

Due to the fact that Richardson Electronics, Ltd. (NASDAQ:RELL) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of money managers who sold off their positions entirely heading into Q2. Intriguingly, Cliff Asness’s AQR Capital Management cut the biggest stake of the 450+ funds we watch, totaling an estimated $0.2 million in stock.. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its stock, about $0.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q2.

What have insiders been doing with Richardson Electronics, Ltd. (NASDAQ:RELL)?

Insider purchases made by high-level executives is particularly usable when the company in question has seen transactions within the past 180 days. Over the last six-month time frame, Richardson Electronics, Ltd. (NASDAQ:RELL) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

With the results shown by Insider Monkey’s tactics, retail investors must always monitor hedge fund and insider trading activity, and Richardson Electronics, Ltd. (NASDAQ:RELL) is an important part of this process.

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