Should You Avoid CAI International Inc (CAP)?

CAI International Inc (NYSE:CAP) shareholders have witnessed a decrease in hedge fund interest of late.

According to most stock holders, hedge funds are assumed to be worthless, old investment tools of yesteryear. While there are more than 8000 funds trading at the moment, we hone in on the moguls of this group, around 450 funds. It is widely believed that this group controls the lion’s share of the smart money’s total capital, and by tracking their highest performing picks, we have figured out a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outperformed 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as important, optimistic insider trading activity is another way to break down the world of equities. Obviously, there are a number of reasons for a bullish insider to get rid of shares of his or her company, but just one, very obvious reason why they would behave bullishly. Many empirical studies have demonstrated the useful potential of this tactic if shareholders know what to do (learn more here).

With all of this in mind, we’re going to take a glance at the key action encompassing CAI International Inc (NYSE:CAP).

How are hedge funds trading CAI International Inc (NYSE:CAP)?

At the end of the first quarter, a total of 6 of the hedge funds we track were bullish in this stock, a change of -25% from the first quarter. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly.

Of the funds we track, Peter S. Park’s Park West Asset Management had the most valuable position in CAI International Inc (NYSE:CAP), worth close to $10 million, accounting for 1.1% of its total 13F portfolio. Sitting at the No. 2 spot is Harvest Capital Strategies, managed by Joseph A. Jolson, which held a $4 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers that are bullish include Jim Simons’s Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’s AQR Capital Management.

Judging by the fact that CAI International Inc (NYSE:CAP) has faced bearish sentiment from the smart money, logic holds that there lies a certain “tier” of fund managers who sold off their positions entirely last quarter. Intriguingly, Israel Englander’s Millennium Management cut the biggest position of the 450+ funds we watch, worth about $7.3 million in stock., and Anil Stevens and Glenn Shapiro of Parameter Capital Management was right behind this move, as the fund dumped about $1.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Insider trading activity in CAI International Inc (NYSE:CAP)

Insider purchases made by high-level executives is best served when the company in question has experienced transactions within the past 180 days. Over the last six-month time period, CAI International Inc (NYSE:CAP) has seen zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

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

With the results demonstrated by our strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and CAI International Inc (NYSE:CAP) is no exception.

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