Should You Avoid Sensient Technologies Corporation (SXT)?

Sensient Technologies Corporation (NYSE:SXT) investors should pay attention to a decrease in enthusiasm from smart money in recent months.

In the 21st century investor’s toolkit, there are dozens of gauges investors can use to watch their holdings. A duo of the most useful are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the elite money managers can beat the S&P 500 by a very impressive amount (see just how much).

Just as important, bullish insider trading sentiment is a second way to break down the financial markets. Just as you’d expect, there are many stimuli for a corporate insider to sell shares of his or her company, but just one, very simple reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this strategy if investors know where to look (learn more here).

Now, let’s take a look at the recent action surrounding Sensient Technologies Corporation (NYSE:SXT).

How are hedge funds trading Sensient Technologies Corporation (NYSE:SXT)?

Heading into Q2, a total of 11 of the hedge funds we track were bullish in this stock, a change of -8% from the first quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably.

According to our comprehensive database, Mario Gabelli’s GAMCO Investors had the biggest position in Sensient Technologies Corporation (NYSE:SXT), worth close to $57.7 million, comprising 0.4% of its total 13F portfolio. Coming in second is Martin Whitman of Third Avenue Management, with a $35.4 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Jim Simons’s Renaissance Technologies, Ken Griffin’s Citadel Investment Group and Ken Gray and Steve Walsh’s Bryn Mawr Capital.

Due to the fact that Sensient Technologies Corporation (NYSE:SXT) has faced bearish sentiment from the smart money, logic holds that there were a few funds who sold off their full holdings in Q1. Intriguingly, Matthew Tewksbury’s Stevens Capital Management said goodbye to the largest position of all the hedgies we track, comprising an estimated $0.8 million in stock.. Paul Tudor Jones’s fund, Tudor Investment Corp, also dumped its stock, about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds in Q1.

What have insiders been doing with Sensient Technologies Corporation (NYSE:SXT)?

Insider purchases made by high-level executives is most useful when the primary stock in question has seen transactions within the past 180 days. Over the latest 180-day time frame, Sensient Technologies Corporation (NYSE:SXT) 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 Sensient Technologies Corporation (NYSE:SXT). These stocks are Cabot Corp (NYSE:CBT), Chemtura Corp (NYSE:CHMT), Kronos Worldwide, Inc. (NYSE:KRO), Olin Corporation (NYSE:OLN), and HB Fuller Co (NYSE:FUL). This group of stocks belong to the specialty chemicals industry and their market caps resemble SXT’s market cap.

With the results shown by our time-tested strategies, retail investors must always watch hedge fund and insider trading sentiment, and Sensient Technologies Corporation (NYSE:SXT) is no exception.

Click here to learn why you should track hedge funds