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Do Hedge Funds and Insiders Love Canadian Pacific Railway Limited (USA) (NYSE:CP)?

Is Canadian Pacific Railway Limited (USA) (NYSE:CP) a buy right now? The smart money is becoming more confident. The number of bullish hedge fund bets moved up by 7 recently.

Canadian Pacific Railway Limited (USA) (NYSE:CP)

In the 21st century investor’s toolkit, there are many indicators investors can use to monitor the equity markets. A pair of the best are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the broader indices by a solid amount (see just how much).

Just as integral, optimistic insider trading activity is a second way to break down the stock market universe. As the old adage goes: there are plenty of stimuli for an insider to downsize shares of his or her company, but only one, very obvious reason why they would behave bullishly. Many academic studies have demonstrated the market-beating potential of this method if you understand where to look (learn more here).

With all of this in mind, let’s take a glance at the latest action surrounding Canadian Pacific Railway Limited (USA) (NYSE:CP).

How have hedgies been trading Canadian Pacific Railway Limited (USA) (NYSE:CP)?

At the end of the fourth quarter, a total of 30 of the hedge funds we track were bullish in this stock, a change of 30% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially.

Of the funds we track, Bill Ackman’s Pershing Square had the largest position in Canadian Pacific Railway Limited (USA) (NYSE:CP), worth close to $2.455 billion, comprising 26.8% of its total 13F portfolio. The second largest stake is held by Daniel S. Och of OZ Management, with a $381 million position; 2.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include Patrick Degorce’s Theleme Partners, Bain Capital’s Brookside Capital and David Stemerman’s Conatus Capital Management.

As one would reasonably expect, key money managers have been driving this bullishness. Brookside Capital, managed by Bain Capital, created the most valuable position in Canadian Pacific Railway Limited (USA) (NYSE:CP). Brookside Capital had 103 million invested in the company at the end of the quarter. Larry Robbins’s Glenview Capital also made a $72 million investment in the stock during the quarter. The other funds with new positions in the stock are Sean Cullinan’s Point State Capital, James Dinan’s York Capital Management, and Stephen Mandel’s Lone Pine Capital.

Insider trading activity in Canadian Pacific Railway Limited (USA) (NYSE:CP)

Insider trading activity, especially when it’s bullish, is particularly usable when the company in question has seen transactions within the past half-year. Over the last 180-day time period, Canadian Pacific Railway Limited (USA) (NYSE:CP) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the results demonstrated by the aforementioned time-tested strategies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Canadian Pacific Railway Limited (USA) (NYSE:CP) 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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