This Metric Says You Are Smart to Sell Titan Machinery Inc. (TITN)

Titan Machinery Inc. (NASDAQ:TITN) investors should pay attention to a decrease in hedge fund sentiment recently.

If you’d ask most traders, hedge funds are assumed to be worthless, outdated financial vehicles of years past. While there are greater than 8000 funds trading at present, we choose to focus on the leaders of this group, close to 450 funds. It is widely believed that this group controls the majority of the smart money’s total capital, and by keeping an eye on their top picks, we have come up with a number of investment strategies that have historically outstripped the S&P 500 index. 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 topped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as beneficial, optimistic insider trading sentiment is another way to parse down the financial markets. Obviously, there are lots of incentives for an executive to get rid of shares of his or her company, but just one, very clear reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this method if you know what to do (learn more here).

Consequently, let’s take a gander at the key action regarding Titan Machinery Inc. (NASDAQ:TITN).

What have hedge funds been doing with Titan Machinery Inc. (NASDAQ:TITN)?

In preparation for this quarter, a total of 12 of the hedge funds we track were bullish in this stock, a change of -8% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully.

When looking at the hedgies we track, David Keidan’s Buckingham Capital Management had the most valuable position in Titan Machinery Inc. (NASDAQ:TITN), worth close to $9 million, comprising 0.8% of its total 13F portfolio. The second largest stake is held by Jay Petschek and Steven Major of Corsair Capital Management, with a $5.3 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Ken Griffin’s Citadel Investment Group, Richard Driehaus’s Driehaus Capital and Malcolm Fairbairn’s Ascend Capital.

Judging by the fact that Titan Machinery Inc. (NASDAQ:TITN) has experienced falling interest from the smart money, we can see that there is a sect of hedgies that slashed their entire stakes at the end of the first quarter. It’s worth mentioning that Ken Brodkowitz and Mike Vermut’s Newland Capital sold off the biggest stake of all the hedgies we key on, valued at close to $3.8 million in stock., and Jim Simons of Renaissance Technologies was right behind this move, as the fund sold off about $0.8 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds at the end of the first quarter.

How have insiders been trading Titan Machinery Inc. (NASDAQ:TITN)?

Insider buying is most useful when the company in focus has seen transactions within the past half-year. Over the last six-month time frame, Titan Machinery Inc. (NASDAQ:TITN) has experienced zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Titan Machinery Inc. (NASDAQ:TITN). These stocks are Barnes & Noble, Inc. (NYSE:BKS), Zumiez Inc. (NASDAQ:ZUMZ), Brown Shoe Company, Inc. (NYSE:BWS), American Greetings Corporation (NYSE:AM), and United Online, Inc. (NASDAQ:UNTD). This group of stocks are in the specialty retail, other industry and their market caps are similar to TITN’s market cap.