Should You Avoid Zagg Inc (ZAGG)?

If you were to ask many of your fellow readers, hedge funds are assumed to be delayed, old investment vehicles of a forgotten age. Although there are In excess of 8,000 hedge funds trading today, this site looks at the leaders of this club, about 525 funds. It is assumed that this group has its hands on the majority of the smart money’s total assets, and by paying attention to their best investments, we’ve figured out a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy beat 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 outclassed the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as useful, positive insider trading sentiment is a second way to look at the investments you’re interested in. Just as you’d expect, there are lots of incentives for an upper level exec to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the market-beating potential of this method if shareholders understand what to do (learn more here).

What’s more, we’re going to examine the latest info surrounding Zagg Inc (NASDAQ:ZAGG).

What does the smart money think about Zagg Inc (NASDAQ:ZAGG)?

In preparation for the third quarter, a total of 7 of the hedge funds we track were long in this stock, a change of -22% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly.

Out of the hedge funds we follow, Royce & Associates, managed by Chuck Royce, holds the biggest position in Zagg Inc (NASDAQ:ZAGG). Royce & Associates has a $3.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Constantinos J. Christofilis of Archon Capital Management, with a $1.8 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other hedgies that are bullish include Joel Greenblatt’s Gotham Asset Management, Thomas E. Lynch’s Mill Road Capital Management and Paul Tudor Jones’s Tudor Investment Corp.

As Zagg Inc (NASDAQ:ZAGG) has experienced bearish sentiment from the top-tier hedge fund industry, it’s safe to say that there was a specific group of hedge funds that elected to cut their full holdings at the end of the second quarter. At the top of the heap, Randall Smith’s Alden Global Capital dropped the largest stake of the “upper crust” of funds we monitor, totaling an estimated $6.4 million in stock. Peter S. Park’s fund, Park West Asset Management, also dropped its stock, about $2.5 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds at the end of the second quarter.

How are insiders trading Zagg Inc (NASDAQ:ZAGG)?

Legal insider trading, particularly when it’s bullish, is most useful when the company in focus has experienced transactions within the past six months. Over the latest six-month time period, Zagg Inc (NASDAQ:ZAGG) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to Zagg Inc (NASDAQ:ZAGG). These stocks are TravelCenters of America LLC (NYSEAMEX:TA), West Marine, Inc. (NASDAQ:WMAR), XO Group Inc (NYSE:XOXO), Odyssey Marine Exploration Inc (NASDAQ:OMEX), and CSS Industries, Inc. (NYSE:CSS). This group of stocks belong to the specialty retail, other industry and their market caps are similar to ZAGG’s market cap.

Using the results demonstrated by our strategies, regular investors must always track hedge fund and insider trading sentiment, and Zagg Inc (NASDAQ:ZAGG) is no exception.

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