To many of your peers, hedge funds are seen as overrated, outdated financial tools of an era lost to time. Although there are In excess of 8,000 hedge funds in operation in present day, Insider Monkey focuses on the crème de la crème of this club, about 525 funds. It is widely held that this group oversees most of the hedge fund industry's total capital, and by watching their highest quality stock picks, we've uncovered a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum 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 trumped the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Just as useful, optimistic insider trading activity is a second way to look at the world of equities. There are a number of motivations for a bullish insider to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the useful potential of this method if shareholders know what to do (learn more here).
Thus, let's study the recent info about Dillard's, Inc. (NYSE:DDS).
At Q2's end, a total of 20 of the hedge funds we track were long in this stock, a change of -5% from the previous quarter. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably.
According to our 13F database, Cliff Asness's AQR Capital Management had the most valuable position in Dillard's, Inc. (NYSE:DDS), worth close to $72.8 million, accounting for 0.3% of its total 13F portfolio. Coming in second is Jim Simons of Renaissance Technologies, with a $68.9 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedgies that are bullish include John Overdeck and David Siegel's Two Sigma Advisors, Steven Cohen's SAC Capital Advisors and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Due to the fact Dillard's, Inc. (NYSE:DDS) has faced a fall in interest from the smart money's best and brightest, it's safe to say that there exists a select few hedgies that slashed their positions entirely at the end of the second quarter. Intriguingly, Curtis Macnguyen's Ivory Capital (Investment Mgmt) said goodbye to the biggest position of the "upper crust" of funds we key on, valued at about $4.8 million in stock, and D. E. Shaw of D E Shaw was right behind this move, as the fund sold off about $1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds at the end of the second quarter.
Legal insider trading, particularly when it's bullish, is best served when the company we're looking at has seen transactions within the past six months. Over the last six-month time period, Dillard's, Inc. (NYSE:DDS) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
We'll also review the relationship between both of these indicators in other stocks similar to Dillard's, Inc. (NYSE:DDS). These stocks are Sears Hometown and Outlet Stores Inc (NASDAQ:SHOS), Kohl's Corporation (NYSE:KSS), Saks Inc (NYSE:SKS), Sears Holdings Corporation (NASDAQ:SHLD), and J.C. Penney Company, Inc. (NYSE:JCP). This group of stocks are the members of the department stores industry and their market caps resemble DDS's market cap.