Stewart Enterprises, Inc. (STEI): Are Hedge Funds Right About This Stock?

Is Stewart Enterprises, Inc. (NASDAQ:STEI) a good investment?

If you were to ask many market players, hedge funds are viewed as delayed, old investment vehicles of a period lost to current times. Although there are In excess of 8,000 hedge funds trading in present day, this site aim at the top tier of this group, around 525 funds. It is assumed that this group controls the majority of the hedge fund industry’s total assets, and by paying attention to their best picks, we’ve formulated a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as crucial, positive insider trading sentiment is another way to look at the investments you’re interested in. As the old adage goes: there are a number of stimuli for a bullish insider to get rid of shares of his or her company, but only one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this strategy if you understand what to do (learn more here).

What’s more, let’s study the latest info for Stewart Enterprises, Inc. (NASDAQ:STEI).

How are hedge funds trading Stewart Enterprises, Inc. (NASDAQ:STEI)?

At Q2’s end, a total of 17 of the hedge funds we track were bullish in this stock, a change of -11% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially.

When using filings from the hedgies we track, Matthew Halbower’s Pentwater Capital Management had the biggest position in Stewart Enterprises, Inc. (NASDAQ:STEI), worth close to $99.7 million, accounting for 2.1% of its total 13F portfolio. The second largest stake is held by Jane Mendillo of Harvard Management Co, with a $66.1 million position; 7.1% of its 13F portfolio is allocated to the company. Remaining hedgies that hold long positions include Robert Emil Zoellner’s Alpine Associates, Mario Gabelli’s GAMCO Investors and Cliff Asness’s AQR Capital Management.

Judging by the fact that Stewart Enterprises, Inc. (NASDAQ:STEI) has faced bearish sentiment from the top-tier hedge fund industry, we can see that there exists a select few hedge funds that decided to sell off their entire stakes in Q1. Intriguingly, Malcolm Fairbairn’s Ascend Capital dumped the biggest position of all the hedgies we key on, worth an estimated $11.7 million in stock, and Rob Butts and Josh Clark of Southpoint Capital Advisors was right behind this move, as the fund sold off about $4.7 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds in Q1.

How have insiders been trading Stewart Enterprises, Inc. (NASDAQ:STEI)?

Bullish insider trading is most useful when the company we’re looking at has experienced transactions within the past half-year. Over the latest six-month time period, Stewart Enterprises, Inc. (NASDAQ:STEI) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to Stewart Enterprises, Inc. (NASDAQ:STEI). These stocks are StoneMor Partners L.P. (NYSE:STON), eLong, Inc. (ADR) (NASDAQ:LONG), Regis Corporation (NYSE:RGS), Steiner Leisure Ltd (NASDAQ:STNR), and G&K Services Inc (NASDAQ:GK). This group of stocks are the members of the personal services industry and their market caps match STEI’s market cap.

Using the returns explained by our studies, regular investors must always track hedge fund and insider trading activity, and Stewart Enterprises, Inc. (NASDAQ:STEI) is an important part of this process.

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