This Metric Told You To Sell Aeropostale, Inc. (ARO) Before Today’s Crash. Did You Listen?
Aeropostale, Inc. (NYSE:ARO) is falling apart today. We have a metric that told you to sell before today's crash. Did you listen?
To many of your fellow readers, hedge funds are perceived as delayed, old financial tools of a forgotten age. Although there are more than 8,000 hedge funds in operation today, Insider Monkey aim at the bigwigs of this group, close to 525 funds. Analysts calculate that this group oversees most of all hedge funds' total capital, and by watching their highest performing investments, we've discovered a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 33 percentage points in 11 months (find the details here).
Just as necessary, bullish insider trading sentiment is another way to analyze the financial markets. Obviously, there are a variety of motivations for an insider to downsize shares of his or her company, but just one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the useful potential of this tactic if you know what to do (learn more here).
Thus, let's analyze the recent info for Aeropostale, Inc. (NYSE:ARO).
What does the smart money think about Aeropostale, Inc. (NYSE:ARO)?
At the end of the second quarter, a total of 15 of the hedge funds we track held long positions in this stock, a change of -25% from one quarter earlier. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings considerably.
When using filings from the hedgies we track, Matt Sirovich and Jeremy Mindich's Scopia Capital had the biggest position in Aeropostale, Inc. (NYSE:ARO), worth close to $68 million, accounting for 1.9% of its total 13F portfolio. On Scopia Capital's heels is Patrick McCormack of Tiger Consumer Management, with a $49.1 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Ricky Sandler's Eminence Capital, Richard S. Pzena's Pzena Investment Management and Craig C. Albert's Sheffield Asset Management.
Because Aeropostale, Inc. (NYSE:ARO) has faced a fall in interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of fund managers who sold off their positions entirely heading into Q2. Intriguingly, Israel Englander's Millennium Management cut the biggest position of the 450+ funds we monitor, worth an estimated $9.3 million in stock. David Costen Haley's fund, HBK Investments, also said goodbye to its stock, about $1 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds heading into Q2.
What have insiders been doing with Aeropostale, Inc. (NYSE:ARO)?
Bullish insider trading is best served when the primary stock in question has experienced transactions within the past 180 days. Over the latest 180-day time frame, Aeropostale, Inc. (NYSE:ARO) has seen zero unique insiders purchasing, and 2 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 Aeropostale, Inc. (NYSE:ARO). These stocks are Stage Stores Inc (NYSE:SSI), Ann Inc (NYSE:ANN), Jos. A. Bank Clothiers Inc (NASDAQ:JOSB), The Jones Group Inc. (NYSE:JNY), and Children's Place Retail Stores, Inc. (NASDAQ:PLCE). This group of stocks belong to the apparel stores industry and their market caps are closest to ARO's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
Stage Stores Inc (NYSE:SSI)
Ann Inc (NYSE:ANN)
Jos. A. Bank Clothiers Inc (NASDAQ:JOSB)
The Jones Group Inc. (NYSE:JNY)
Children's Place Retail Stores, Inc. (NASDAQ:PLCE)
Using the results shown by the previously mentioned strategies, average investors should always pay attention to hedge fund and insider trading activity, and Aeropostale, Inc. (NYSE:ARO) is an important part of this process.