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Discover Financial Services (NYSE:DFS): Are Hedge Funds Right About This Stock?

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Discover Financial Services (NYSE:DFS) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently.
In today’s marketplace, there are dozens of methods investors can use to watch stocks. Some of the most underrated are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace the broader indices by a superb margin (see just how much).
Equally as key, bullish insider trading sentiment is another way to break down the marketplace. Just as you’d expect, there are lots of incentives for a bullish insider to sell shares of his or her company, but only one, very simple reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this tactic if “monkeys” know where to look (learn more here).
Consequently, it’s important to take a glance at the latest action surrounding Discover Financial Services (NYSE:DFS).

How have hedgies been trading Discover Financial Services (NYSE:DFS)?

Heading into 2013, a total of 37 of the hedge funds we track were bullish in this stock, a change of 9% from the third quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings considerably.
According to our comprehensive database, Donald Chiboucis’s Columbus Circle Investors had the most valuable position in Discover Financial Services (NYSE:DFS), worth close to $240 million billion, comprising 1.9% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which held a $200 million position; 1.6% of its 13F portfolio is allocated to the company. Other hedgies that are bullish include Steven Cohen’s SAC Capital Advisors, Daniel S. Och’s OZ Management and Cliff Asness’s AQR Capital Management.
As industrywide interest jumped, key hedge funds have jumped into Discover Financial Services (NYSE:DFS) headfirst. Samlyn Capital, managed by Robert Pohly, established the most valuable position in Discover Financial Services (NYSE:DFS). Samlyn Capital had 47 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $28 million investment in the stock during the quarter. The other funds with new positions in the stock are Mark Kingdon’s Kingdon Capital, Robert Pitts’s Steadfast Capital Management, and James Dinan’s York Capital Management.

How have insiders been trading Discover Financial Services (NYSE:DFS)?

Insider trading activity, especially when it’s bullish, is at its handiest when the primary stock in question has experienced transactions within the past 180 days. Over the latest half-year time period, Discover Financial Services (NYSE:DFS) has experienced zero unique insiders buying, and 7 insider sales (see the details of insider trades here).
With the returns demonstrated by Insider Monkey’s studies, retail investors should always watch hedge fund and insider trading sentiment, and Discover Financial Services (NYSE:DFS) shareholders fit into this picture quite nicely.
Click here to learn more about Insider Monkey’s Hedge Fund Newsletter
Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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