Alon USA Energy, Inc. (NYSE:ALJ) investors should pay attention to an increase in activity from the world's largest hedge funds of late.
In the eyes of most market participants, hedge funds are viewed as unimportant, old investment tools of yesteryear. While there are greater than 8000 funds trading at present, we at Insider Monkey hone in on the leaders of this group, about 450 funds. Most estimates calculate that this group has its hands on the majority of the smart money's total capital, and by monitoring their best investments, we have uncovered a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Equally as important, positive insider trading sentiment is another way to parse down the stock market universe. Obviously, there are many reasons for a bullish insider to downsize shares of his or her company, but only one, very clear reason why they would buy. Several empirical studies have demonstrated the market-beating potential of this tactic if shareholders know where to look (learn more here).
Now, we're going to take a look at the recent action regarding Alon USA Energy, Inc. (NYSE:ALJ).
Heading into Q2, a total of 16 of the hedge funds we track were bullish in this stock, a change of 23% from the previous quarter. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully.
When looking at the hedgies we track, Renaissance Technologies, managed by Jim Simons, holds the largest position in Alon USA Energy, Inc. (NYSE:ALJ). Renaissance Technologies has a $17.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which held a $6.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish include Israel Englander's Millennium Management, Ken Griffin's Citadel Investment Group and Joel Greenblatt's Gotham Asset Management.
Consequently, specific money managers were breaking ground themselves. Highbridge Capital Management, managed by Glenn Russell Dubin, established the largest position in Alon USA Energy, Inc. (NYSE:ALJ). Highbridge Capital Management had 3 million invested in the company at the end of the quarter. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk's GRT Capital Partners also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new ALJ position is Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Bullish insider trading is most useful when the company we're looking at has experienced transactions within the past 180 days. Over the latest 180-day time period, Alon USA Energy, Inc. (NYSE:ALJ) has experienced zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).
With the results exhibited by the aforementioned time-tested strategies, retail investors should always monitor hedge fund and insider trading activity, and Alon USA Energy, Inc. (NYSE:ALJ) is no exception.