This Metric Says You Are Smart to Sell Cal Dive International, Inc. (DVR)

Is Cal Dive International, Inc. (NYSE:DVR) going to take off soon? Prominent investors are getting less bullish. The number of long hedge fund bets retreated by 2 recently.

If you’d ask most stock holders, hedge funds are perceived as underperforming, old investment vehicles of years past. While there are over 8000 funds in operation at the moment, we look at the masters of this club, around 450 funds. It is widely believed that this group has its hands on the lion’s share of all hedge funds’ total capital, and by paying attention to their top investments, we have figured out a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year 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 24 percentage points in 7 months (explore the details and some picks here).

Equally as important, positive insider trading activity is a second way to break down the investments you’re interested in. As the old adage goes: there are a number of reasons for an insider to get rid of shares of his or her company, but just one, very clear reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the market-beating potential of this method if piggybackers know where to look (learn more here).

Now, let’s take a look at the recent action regarding Cal Dive International, Inc. (NYSE:DVR).

What does the smart money think about Cal Dive International, Inc. (NYSE:DVR)?

In preparation for this year, a total of 10 of the hedge funds we track held long positions in this stock, a change of -17% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully.

When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the most valuable position in Cal Dive International, Inc. (NYSE:DVR), worth close to $3.6 million, accounting for less than 0.1%% of its total 13F portfolio. On Royce & Associates’s heels is Renaissance Technologies, managed by Jim Simons, which held a $1.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedgies with similar optimism include Jon Bauer’s Contrarian Capital, D. E. Shaw’s D E Shaw and David Cohen and Harold Levy’s Iridian Asset Management.

Since Cal Dive International, Inc. (NYSE:DVR) has experienced a declination in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of fund managers who were dropping their full holdings at the end of the year. Interestingly, Malcolm Fairbairn’s Ascend Capital dropped the largest position of all the hedgies we watch, valued at an estimated $6.4 million in stock., and Paul Tudor Jones of Tudor Investment Corp was right behind this move, as the fund cut about $0.1 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds at the end of the year.

What have insiders been doing with Cal Dive International, Inc. (NYSE:DVR)?

Insider buying is best served when the primary stock in question has seen transactions within the past half-year. Over the last half-year time frame, Cal Dive International, Inc. (NYSE:DVR) has experienced 2 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Cal Dive International, Inc. (NYSE:DVR). These stocks are Dawson Geophysical Company (NASDAQ:DWSN), Natural Gas Services Group, Inc. (NYSE:NGS), Bolt Technology Corp. (NASDAQ:BOLT), TGC Industries Inc (NASDAQ:TGE), and North American Energy Partners Inc.(USA) (NYSE:NOA). This group of stocks are in the oil & gas equipment & services industry and their market caps are similar to DVR’s market cap.