This Metric Says You Are Smart to Sell Airgas, Inc. (ARG)

Airgas, Inc. (NYSE:ARG) was in 20 hedge funds’ portfolio at the end of the first quarter of 2013. ARG shareholders have witnessed a decrease in hedge fund interest of late. There were 22 hedge funds in our database with ARG positions at the end of the previous quarter.

To the average investor, there are plenty of gauges shareholders can use to analyze stocks. A duo of the most useful are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best fund managers can beat the market by a solid margin (see just how much).

Equally as beneficial, bullish insider trading activity is another way to parse down the marketplace. As the old adage goes: there are a variety of stimuli for an insider to sell shares of his or her company, but just one, very clear reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this strategy if piggybackers know where to look (learn more here).

Keeping this in mind, we’re going to take a look at the recent action encompassing Airgas, Inc. (NYSE:ARG).

What does the smart money think about Airgas, Inc. (NYSE:ARG)?

In preparation for this quarter, a total of 20 of the hedge funds we track were long in this stock, a change of -9% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, Merchants’ Gate Capital, managed by Jason Capello, holds the most valuable position in Airgas, Inc. (NYSE:ARG). Merchants’ Gate Capital has a $209.3 million position in the stock, comprising 9.7% of its 13F portfolio. Sitting at the No. 2 spot is Robert Joseph Caruso of Select Equity Group, with a $147.2 million position; 2% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Richard Chilton’s Chilton Investment Company, John Lykouretzos’s Hoplite Capital Management and David Harding’s Winton Capital Management.

Since Airgas, Inc. (NYSE:ARG) has experienced falling interest from hedge fund managers, logic holds that there was a specific group of hedgies who were dropping their positions entirely last quarter. At the top of the heap, D. E. Shaw’s D E Shaw said goodbye to the biggest position of all the hedgies we key on, comprising close to $8.3 million in stock.. Jim Simons’s fund, Renaissance Technologies, also dumped its stock, about $6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

What do corporate executives and insiders think about Airgas, Inc. (NYSE:ARG)?

Insider buying is most useful when the company in focus has seen transactions within the past 180 days. Over the last six-month time frame, Airgas, Inc. (NYSE:ARG) has experienced zero unique insiders purchasing, and 14 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Airgas, Inc. (NYSE:ARG). These stocks are Wesco Aircraft Holdings Inc (NYSE:WAIR), Applied Industrial Technologies (NYSE:AIT), WESCO International, Inc. (NYSE:WCC), W.W. Grainger, Inc. (NYSE:GWW), and MSC Industrial Direct Co Inc (NYSE:MSM). This group of stocks are in the industrial equipment wholesale industry and their market caps match ARG’s market cap.

With the returns shown by the aforementioned strategies, retail investors must always pay attention to hedge fund and insider trading sentiment, and Airgas, Inc. (NYSE:ARG) is no exception.

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