Is National Grid plc (ADR) (NYSE:NGG) the right investment to pursue these days? Investors who are in the know are taking an optimistic view. The number of long hedge fund bets inched up by 3 recently.
To most investors, hedge funds are assumed to be worthless, old investment tools of the past. While there are over 8000 funds in operation today, we hone in on the aristocrats of this group, close to 450 funds. It is estimated that this group has its hands on most of the hedge fund industry's total asset base, and by monitoring their highest performing equity investments, we have spotted a number of investment strategies that have historically beaten the S&P 500 index. 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 outclassed the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).
Just as key, optimistic insider trading activity is another way to parse down the investments you're interested in. There are plenty of motivations for an insider to sell shares of his or her company, but just one, very clear reason why they would initiate a purchase. Several academic studies have demonstrated the useful potential of this tactic if shareholders know what to do (learn more here).
With these "truths" under our belt, let's take a glance at the key action encompassing National Grid plc (ADR) (NYSE:NGG).
At year's end, a total of 8 of the hedge funds we track were long in this stock, a change of 60% from one quarter earlier. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes substantially.
According to our comprehensive database, Charles Clough's Clough Capital Partners had the largest position in National Grid plc (ADR) (NYSE:NGG), worth close to $25.1 million, comprising 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, managed by Jim Simons, which held a $12.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include D. E. Shaw's D E Shaw, John A. Levin's Levin Capital Strategies and Steven Cohen's SAC Capital Advisors.
As aggregate interest increased, some big names were leading the bulls' herd. D E Shaw, managed by D. E. Shaw, created the biggest position in National Grid plc (ADR) (NYSE:NGG). D E Shaw had 3.3 million invested in the company at the end of the quarter. Steven Cohen's SAC Capital Advisors also initiated a $0.7 million position during the quarter. The other funds with brand new NGG positions are Ken Griffin's Citadel Investment Group and John Overdeck and David Siegel's Two Sigma Advisors.
Insider trading activity, especially when it's bullish, is most useful when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time frame, National Grid plc (ADR) (NYSE:NGG) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let's also review hedge fund and insider activity in other stocks similar to National Grid plc (ADR) (NYSE:NGG). These stocks are Western Gas Equity Partners LP (NYSE:WGP), ONEOK, Inc. (NYSE:OKE), EQT Corporation (NYSE:EQT), Sempra Energy (NYSE:SRE), and TransCanada Corporation (USA) (NYSE:TRP). This group of stocks belong to the gas utilities industry and their market caps resemble NGG's market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Western Gas Equity Partners LP (NYSE:WGP)||2||9||0|
|ONEOK, Inc. (NYSE:OKE)||14||0||1|
|EQT Corporation (NYSE:EQT)||28||3||3|
|Sempra Energy (NYSE:SRE)||12||0||9|
|TransCanada Corporation (USA) (NYSE:TRP)||4||0||0|
With the returns exhibited by our time-tested strategies, everyday investors should always keep an eye on hedge fund and insider trading sentiment, and National Grid plc (ADR) (NYSE:NGG) is an important part of this process.