Should You Buy Cato Corp (CATO)?

Cato Corp (NYSE:CATO) has experienced an increase in hedge fund interest recently.

In the financial world, there are many indicators shareholders can use to watch the equity markets. A couple of the best are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best fund managers can outclass the S&P 500 by a significant margin (see just how much).

Equally as beneficial, bullish insider trading sentiment is another way to break down the world of equities. Obviously, there are many motivations for an executive to sell shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the market-beating potential of this tactic if you know what to do (learn more here).

Consequently, let’s take a look at the key action surrounding Cato Corp (NYSE:CATO).

How have hedgies been trading Cato Corp (NYSE:CATO)?

In preparation for this quarter, a total of 7 of the hedge funds we track were long in this stock, a change of 40% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably.

Of the funds we track, Chuck Royce’s Royce & Associates had the biggest position in Cato Corp (NYSE:CATO), worth close to $99.8 million, accounting for 0.3% of its total 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which held a $8.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Jim Simons’s Renaissance Technologies, Paul Tudor Jones’s Tudor Investment Corp and Joel Greenblatt’s Gotham Asset Management.

As aggregate interest increased, specific money managers were breaking ground themselves. Gotham Asset Management, managed by Joel Greenblatt, initiated the largest position in Cato Corp (NYSE:CATO). Gotham Asset Management had 0.7 million invested in the company at the end of the quarter. Steven Cohen’s SAC Capital Advisors also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Peter Rathjens Bruce Clarke and John Campbell’s Arrowstreet Capital.

Insider trading activity in Cato Corp (NYSE:CATO)

Bullish insider trading is best served when the company we’re looking at has experienced transactions within the past six months. Over the last six-month time period, Cato Corp (NYSE:CATO) has experienced 1 unique insiders buying, and zero 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 Cato Corp (NYSE:CATO). These stocks are Children’s Place Retail Stores, Inc. (NASDAQ:PLCE), The Jones Group Inc. (NYSE:JNY), Hot Topic, Inc. (NASDAQ:HOTT), Stage Stores Inc (NYSE:SSI), and rue21, inc. (NASDAQ:RUE). This group of stocks are in the apparel stores industry and their market caps are closest to CATO’s market cap.