Should You Avoid RealD (RLD)?

RealD (NYSE:RLD) was in 14 hedge funds’ portfolio at the end of the first quarter of 2013. RLD investors should pay attention to a decrease in enthusiasm from smart money lately. There were 15 hedge funds in our database with RLD positions at the end of the previous quarter.

To the average investor, there are many gauges investors can use to monitor stocks. A pair of the most innovative are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite investment managers can outclass their index-focused peers by a superb amount (see just how much).

Just as integral, optimistic insider trading activity is another way to break down the world of equities. Just as you’d expect, there are a number of incentives for an executive to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this strategy if you know where to look (learn more here).

Consequently, it’s important to take a peek at the key action regarding RealD (NYSE:RLD).

How have hedgies been trading RealD (NYSE:RLD)?

Heading into Q2, a total of 14 of the hedge funds we track were bullish in this stock, a change of -7% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably.

According to our comprehensive database, Bares Capital Management, managed by Brian Bares, holds the most valuable position in RealD (NYSE:RLD). Bares Capital Management has a $61.1 million position in the stock, comprising 7.8% of its 13F portfolio. On Bares Capital Management’s heels is Mark Broach of Manatuck Hill Partners, with a $29.4 million position; the fund has 3.7% of its 13F portfolio invested in the stock. Other hedge funds that are bullish include Joseph A. Jolson’s Harvest Capital Strategies, Mario Gabelli’s GAMCO Investors and Larry Foley and Paul Farrell’s Bronson Point Partners.

Judging by the fact that RealD (NYSE:RLD) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds who were dropping their positions entirely last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies cut the biggest investment of the 450+ funds we key on, comprising an estimated $1 million in stock., and Abby Flamholz and Yehuda Blinder of ADAR Investment Management was right behind this move, as the fund sold off about $1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.

How have insiders been trading RealD (NYSE:RLD)?

Insider buying is best served when the company we’re looking at has seen transactions within the past 180 days. Over the last 180-day time period, RealD (NYSE:RLD) has experienced zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to RealD (NYSE:RLD). These stocks are Reading International, Inc. (NASDAQ:RDI), Regal Entertainment Group (NYSE:RGC), Rentrak Corporation (NASDAQ:RENT), Dreamworks Animation Skg Inc (NASDAQ:DWA), and Carmike Cinemas, Inc. (NASDAQ:CKEC). All of these stocks are in the movie production, theaters industry and their market caps are closest to RLD’s market cap.

With the returns exhibited by the aforementioned time-tested strategies, retail investors should always monitor hedge fund and insider trading sentiment, and RealD (NYSE:RLD) is an important part of this process.

Click here to learn why you should track hedge funds