Should You Avoid Garmin Ltd. (GRMN)?

Garmin Ltd. (NASDAQ:GRMN) was in 12 hedge funds’ portfolio at the end of December. GRMN shareholders have witnessed a decrease in hedge fund sentiment lately. There were 13 hedge funds in our database with GRMN holdings at the end of the previous quarter.

In the eyes of most traders, hedge funds are seen as underperforming, old financial tools of yesteryear. While there are over 8000 funds trading today, we at Insider Monkey look at the top tier of this club, around 450 funds. It is estimated that this group oversees the lion’s share of the hedge fund industry’s total capital, and by tracking their top stock picks, we have found a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum 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 topped 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 another way to break down the financial markets. Obviously, there are a variety of motivations for a corporate insider to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Various empirical studies have demonstrated the market-beating potential of this strategy if piggybackers understand where to look (learn more here).

With all of this in mind, we’re going to take a look at the key action surrounding Garmin Ltd. (NASDAQ:GRMN).

Hedge fund activity in Garmin Ltd. (NASDAQ:GRMN)

At the end of the fourth quarter, a total of 12 of the hedge funds we track were bullish in this stock, a change of -8% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly.

When looking at the hedgies we track, Robert Joseph Caruso’s Select Equity Group had the most valuable position in Garmin Ltd. (NASDAQ:GRMN), worth close to $183.8 million, comprising 2.9% of its total 13F portfolio. Sitting at the No. 2 spot is Tetrem Capital Management, managed by Daniel Bubis, which held a $40.1 million position; 1.2% of its 13F portfolio is allocated to the stock. Other hedgies with similar optimism include David Harding’s Winton Capital Management, Chuck Royce’s Royce & Associates and Phill Gross and Robert Atchinson’s Adage Capital Management.

Since Garmin Ltd. (NASDAQ:GRMN) has witnessed bearish sentiment from the smart money, it’s easy to see that there exists a select few fund managers that slashed their entire stakes in Q4. Intriguingly, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners sold off the largest position of the “upper crust” of funds we monitor, totaling about $4.3 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund sold off about $4.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds in Q4.

How have insiders been trading Garmin Ltd. (NASDAQ:GRMN)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company we’re looking at has seen transactions within the past 180 days. Over the last 180-day time period, Garmin Ltd. (NASDAQ:GRMN) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Garmin Ltd. (NASDAQ:GRMN). These stocks are Bio-Rad Laboratories, Inc. (NYSE:BIO), Sensata Technologies Holding N.V. (NYSE:ST), Waters Corporation (NYSE:WAT), and Trimble Navigation Limited (NASDAQ:TRMB). This group of stocks belong to the scientific & technical instruments industry and their market caps resemble GRMN’s market cap.

With the returns demonstrated by the aforementioned tactics, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Garmin Ltd. (NASDAQ:GRMN) is no exception.

Click here to learn why you should track hedge funds