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Altria Group Inc (MO): Hedge Funds and Insiders Are Bearish, What Should You Do?

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Altria Group Inc (NYSE:MO) has seen a decrease in enthusiasm from smart money lately.

According to most market participants, hedge funds are seen as underperforming, old financial tools of the past. While there are more than 8000 funds in operation today, we choose to focus on the elite of this group, about 450 funds. It is estimated that this group has its hands on most of all hedge funds’ total asset base, and by watching their best equity investments, we have deciphered a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per 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 outpaced the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as key, positive insider trading sentiment is a second way to break down the investments you’re interested in. There are a number of incentives for a bullish insider to get rid of shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the market-beating potential of this strategy if piggybackers understand what to do (learn more here).

Now, it’s important to take a look at the recent action surrounding Altria Group Inc (NYSE:MO).

How have hedgies been trading Altria Group Inc (NYSE:MO)?

At the end of the first quarter, a total of 30 of the hedge funds we track were bullish in this stock, a change of -3% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully.

Altria Group Inc (NYSE:MO)Of the funds we track, Gardner Russo & Gardner, managed by Tom Russo, holds the biggest position in Altria Group Inc (NYSE:MO). Gardner Russo & Gardner has a $253.1 million position in the stock, comprising 3% of its 13F portfolio. The second largest stake is held by Phill Gross and Robert Atchinson of Adage Capital Management, with a $77.7 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining hedgies with similar optimism include David Winters’s Wintergreen Advisers, Cliff Asness’s AQR Capital Management and Jim Simons’s Renaissance Technologies.

Judging by the fact that Altria Group Inc (NYSE:MO) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there were a few money managers that decided to sell off their positions entirely at the end of the first quarter. Interestingly, Daniel S. Och’s OZ Management said goodbye to the largest stake of the 450+ funds we watch, worth an estimated $12.1 million in stock., and Murray Stahl of Horizon Asset Management was right behind this move, as the fund cut about $0.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds at the end of the first quarter.

Insider trading activity in Altria Group Inc (NYSE:MO)

Insider buying is best served when the primary stock in question has experienced transactions within the past 180 days. Over the latest half-year time period, Altria Group Inc (NYSE:MO) has experienced zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Altria Group Inc (NYSE:MO). These stocks are Vector Group Ltd (NYSE:VGR), Lorillard Inc. (NYSE:LO), Reynolds American, Inc. (NYSE:RAI), Philip Morris International Inc. (NYSE:PM), and British American Tobacco PLC (ADR) (NYSEAMEX:BTI). This group of stocks are in the cigarettes industry and their market caps resemble MO’s market cap.

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