BorgWarner Inc. (NYSE:BWA) investors should be aware of a decrease in hedge fund interest lately.
In the financial world, there are plenty of indicators shareholders can use to monitor publicly traded companies. Two of the most innovative are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the best money managers can beat the market by a very impressive amount (see just how much).
Equally as key, optimistic insider trading activity is another way to parse down the investments you're interested in. As the old adage goes: there are many incentives for an insider to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Plenty of empirical studies have demonstrated the market-beating potential of this method if you know where to look (learn more here).
With these "truths" under our belt, it's important to take a glance at the key action regarding BorgWarner Inc. (NYSE:BWA).
In preparation for this year, a total of 16 of the hedge funds we track were long in this stock, a change of -16% from one quarter earlier. With hedgies' capital changing hands, there exists a few key hedge fund managers who were upping their stakes meaningfully.
Of the funds we track, Mario Gabelli's GAMCO Investors had the most valuable position in BorgWarner Inc. (NYSE:BWA), worth close to $49 million, accounting for 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, managed by Jim Simons, which held a $27 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining hedge funds that hold long positions include Charles Clough's Clough Capital Partners, D. E. Shaw's D E Shaw and David Tepper's Appaloosa Management LP.
Due to the fact that BorgWarner Inc. (NYSE:BWA) has faced declining sentiment from hedge fund managers, logic holds that there was a specific group of hedge funds who sold off their entire stakes heading into 2013. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest position of all the hedgies we track, worth close to $17 million in stock., and Alexander Mitchell of Scopus Asset Management was right behind this move, as the fund said goodbye to about $14 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds heading into 2013.
Insider buying is most useful when the company we're looking at has experienced transactions within the past six months. Over the last half-year time frame, BorgWarner Inc. (NYSE:BWA) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).
Let's also examine hedge fund and insider activity in other stocks similar to BorgWarner Inc. (NYSE:BWA). These stocks are Lear Corporation (NYSE:LEA), Delphi Automotive PLC (NYSE:DLPH), LKQ Corporation (NASDAQ:LKQ), TRW Automotive Holdings Corp. (NYSE:TRW), and Autoliv Inc. (NYSE:ALV). This group of stocks are the members of the auto parts industry and their market caps resemble BWA's market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Lear Corporation (NYSE:LEA)||37||0||6|
|Delphi Automotive PLC (NYSE:DLPH)||38||0||7|
|LKQ Corporation (NASDAQ:LKQ)||14||1||7|
|TRW Automotive Holdings Corp. (NYSE:TRW)||23||0||8|
|Autoliv Inc. (NYSE:ALV)||10||0||10|
With the returns demonstrated by Insider Monkey's strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and BorgWarner Inc. (NYSE:BWA) is an important part of this process.
Insider Monkey's small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.