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Do Hedge Funds and Insiders Love EarthLink, Inc. (ELNK)?

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EarthLink, Inc. (NASDAQ:ELNK) was in 13 hedge funds’ portfolio at the end of the first quarter of 2013. ELNK investors should be aware of a decrease in support from the world’s most elite money managers lately. There were 19 hedge funds in our database with ELNK positions at the end of the previous quarter.

In the eyes of most market participants, hedge funds are viewed as worthless, outdated investment vehicles of yesteryear. While there are greater than 8000 funds trading at present, we at Insider Monkey hone in on the leaders of this group, around 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total asset base, and by monitoring their top picks, we have unearthed a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year 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 23.3 percentage points in 8 months (see all of our picks from August).

EarthLink, Inc. (NASDAQ:ELNK)Equally as integral, optimistic insider trading activity is another way to break down the financial markets. There are many reasons for an insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this strategy if piggybackers know what to do (learn more here).

With all of this in mind, let’s take a gander at the recent action surrounding EarthLink, Inc. (NASDAQ:ELNK).

What have hedge funds been doing with EarthLink, Inc. (NASDAQ:ELNK)?

In preparation for this quarter, a total of 13 of the hedge funds we track were bullish in this stock, a change of -32% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, Jim Simons’s Renaissance Technologies had the largest position in EarthLink, Inc. (NASDAQ:ELNK), worth close to $35.9 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $18.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedgies with similar optimism include Chuck Royce’s Royce & Associates, Mario Gabelli’s GAMCO Investors and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Due to the fact that EarthLink, Inc. (NASDAQ:ELNK) has faced bearish sentiment from hedge fund managers, logic holds that there exists a select few funds that decided to sell off their full holdings at the end of the first quarter. Intriguingly, Michael Doheny’s Freshford Capital Management sold off the largest position of all the hedgies we monitor, totaling close to $16.3 million in stock., and Jason F. Harris of Kendall Square Capital was right behind this move, as the fund cut about $3.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds at the end of the first quarter.

Insider trading activity in EarthLink, Inc. (NASDAQ:ELNK)

Insider buying is particularly usable when the company in question has seen transactions within the past 180 days. Over the last 180-day time period, EarthLink, Inc. (NASDAQ:ELNK) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to EarthLink, Inc. (NASDAQ:ELNK). These stocks are magicJack VocalTec Ltd (NASDAQ:CALL), Atlantic Tele-Network, Inc. (NASDAQ:ATNI), Consolidated Communications Holdings Inc (NASDAQ:CNSL), and Cincinnati Bell Inc. (NYSE:CBB). This group of stocks belong to the telecom services – domestic industry and their market caps match ELNK’s market cap.

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