Should You Avoid CAI International Inc (CAP)?

Should CAI International Inc (NYSE:CAP) investors track the following data?

If you were to ask many investors, hedge funds are assumed to be delayed, old investment vehicles of an era lost to time. Although there are over 8,000 hedge funds in operation in present day, Insider Monkey looks at the moguls of this group, around 525 funds. It is widely held that this group controls the lion’s share of all hedge funds’ total assets, and by tracking their highest performing investments, we’ve come up with a few investment strategies that have historically outpaced 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 33 percentage points in 11 months (find the details here).

Equally as key, optimistic insider trading activity is another way to analyze the stock market universe. Just as you’d expect, there are plenty of incentives for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the market-beating potential of this tactic if investors understand what to do (learn more here).

Now that that’s out of the way, let’s study the newest info surrounding CAI International Inc (NYSE:CAP).

What have hedge funds been doing with CAI International Inc (NYSE:CAP)?

Heading into Q3, a total of 5 of the hedge funds we track were bullish in this stock, a change of -17% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably.

Out of the hedge funds we follow, Joseph A. Jolson’s Harvest Capital Strategies had the largest position in CAI International Inc (NYSE:CAP), worth close to $3.7 million, comprising 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Alyeska Investment Group, managed by Anand Parekh, which held a $3.5 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds that are bullish include Israel Englander’s Millennium Management, Paul Tudor Jones’s Tudor Investment Corp and Ken Gray and Steve Walsh’s Bryn Mawr Capital.

Due to the fact CAI International Inc (NYSE:CAP) has experienced declining interest from upper-tier hedge fund managers, logic holds that there is a sect of funds that decided to sell off their positions entirely at the end of the second quarter. Interestingly, Peter S. Park’s Park West Asset Management dropped the biggest stake of the “upper crust” of funds we monitor, worth close to $10 million in stock. Jim Simons’s fund, Renaissance Technologies, also cut its stock, about $1.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds at the end of the second quarter.

What do corporate executives and insiders think about CAI International Inc (NYSE:CAP)?

Insider buying is best served when the company we’re looking at has experienced transactions within the past six months. Over the latest six-month time period, CAI International Inc (NYSE:CAP) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators 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 are the members of the rental & leasing services industry and their market caps are similar to CAP’s market cap.

Using the returns demonstrated by the previously mentioned studies, regular investors must always track hedge fund and insider trading activity, and CAI International Inc (NYSE:CAP) is an important part of this process.

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Should You Avoid CAI International Inc (CAP)? 

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