STEC, Inc. (STEC): Hedge Funds and Insiders Are Bullish, What Should You Do?: Xyratex Ltd. (XRTX), Quantum Corp (QTM)

STEC, Inc. (NASDAQ:STEC) was in 15 hedge funds’ portfolio at the end of December. STEC investors should pay attention to an increase in enthusiasm from smart money recently. There were 13 hedge funds in our database with STEC positions at the end of the previous quarter.

To the average investor, there are tons of methods shareholders can use to analyze their holdings. A couple of the most underrated are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the best money managers can beat their index-focused peers by a solid amount (see just how much).

Just as integral, bullish insider trading sentiment is another way to parse down the stock market universe. As the old adage goes: there are a number of reasons for a corporate insider to downsize shares of his or her company, but only one, very simple reason why they would buy. Several empirical studies have demonstrated the impressive potential of this tactic if you know what to do (learn more here).

Keeping this in mind, let’s take a gander at the recent action regarding STEC, Inc. (NASDAQ:STEC).

What have hedge funds been doing with STEC, Inc. (NASDAQ:STEC)?

At year’s end, a total of 15 of the hedge funds we track were long in this stock, a change of 15% from the third quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly.

Of the funds we track, Royce & Associates, managed by Chuck Royce, holds the most valuable position in STEC, Inc. (NASDAQ:STEC). Royce & Associates has a $11 million position in the stock, comprising less than 1% of its 13F portfolio. Sitting at the No. 2 spot is Cadian Capital, managed by Eric Bannasch, which held a $10 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers that hold long positions include Jim Simons’s Renaissance Technologies, Stuart Peterson’s Artis Capital Management and Philippe Laffont’s Coatue Management.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the largest position in STEC, Inc. (NASDAQ:STEC). Tudor Investment Corp had less than $1 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a small investment in the stock during the quarter. The other funds with new positions in the stock are Neil Chriss’s Hutchin Hill Capital and Israel Englander’s Millennium Management.

How have insiders been trading STEC, Inc. (NASDAQ:STEC)?

Insider buying is most useful when the company we’re looking at has experienced transactions within the past six months. Over the latest 180-day time period, STEC, Inc. (NASDAQ:STEC) has seen 2 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to STEC, Inc. (NASDAQ:STEC). These stocks are OCZ Technology Group Inc. (NASDAQ:OCZ), Quantum Corp (NYSE:QTM), Imation Corp. (NYSE:IMN), Xyratex Ltd. (NASDAQ:XRTX), and Datalink Corporation (NASDAQ:DTLK). This group of stocks belong to the data storage devices industry and their market caps match STEC’s market cap.