In the eyes of many traders, hedge funds are assumed to be useless, old investment vehicles of a period lost to current times. Although there are more than 8,000 hedge funds with their doors open currently, this site looks at the masters of this group, about 525 funds. It is widely held that this group oversees the majority of the smart money's total assets, and by keeping an eye on their best stock picks, we've uncovered a number of investment strategies that have historically outstripped the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually 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 beaten the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).
Just as useful, optimistic insider trading activity is another way to analyze the stock market universe. There are many incentives for a bullish insider to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the valuable potential of this tactic if you know what to do (learn more here).
Keeping this in mind, it's important to analyze the newest info surrounding Ashland Inc. (NYSE:ASH).
At the end of the second quarter, a total of 28 of the hedge funds we track were long in this stock, a change of -13% from the previous quarter. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings substantially.
Out of the hedge funds we follow, Barry Rosenstein's JANA Partners had the most valuable position in Ashland Inc. (NYSE:ASH), worth close to $477.8 million, comprising 6.7% of its total 13F portfolio. On JANA Partners's heels is Frank Brosens of Taconic Capital, with a $225.5 million position; 8.2% of its 13F portfolio is allocated to the company. Remaining hedge funds that hold long positions include Alexander Roepers's Atlantic Investment Management, Doug Silverman and Alexander Klabin's Senator Investment Group and Ken Griffin's Citadel Investment Group.
Because Ashland Inc. (NYSE:ASH) has faced a fall in interest from the top-tier hedge fund industry, we can see that there was a specific group of funds that elected to cut their positions entirely in Q1. At the top of the heap, Ralph V. Whitworth's Relational Investors sold off the largest stake of all the hedgies we watch, valued at about $129.5 million in stock. Keith Meister's fund, Corvex Capital, also cut its stock, about $31.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds in Q1.
Insider buying made by high-level executives is best served when the company in focus has experienced transactions within the past 180 days. Over the latest half-year time period, Ashland Inc. (NYSE:ASH) has seen zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).
We'll also examine the relationship between both of these indicators in other stocks similar to Ashland Inc. (NYSE:ASH). These stocks are FMC Corp (NYSE:FMC), Huntsman Corporation (NYSE:HUN), Celanese Corporation (NYSE:CE), Braskem SA (ADR) (NYSE:BAK), and Valhi, Inc. (NYSE:VHI). All of these stocks are in the chemicals - major diversified industry and their market caps are similar to ASH's market cap.