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Eaton Corporation, PLC Ordinary Shares (ETN): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

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Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) was in 45 hedge funds’ portfolio at the end of the first quarter of 2013. ETN has experienced an increase in support from the world’s most elite money managers recently. There were 34 hedge funds in our database with ETN positions at the end of the previous quarter.

Eaton logoIf you’d ask most shareholders, hedge funds are perceived as unimportant, outdated financial tools of yesteryear. While there are over 8000 funds trading today, we at Insider Monkey look at the moguls of this group, close to 450 funds. It is widely believed that this group oversees the majority of the smart money’s total asset base, and by keeping an eye on their best picks, we have unearthed a few investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Equally as important, bullish insider trading sentiment is another way to break down the marketplace. As the old adage goes: there are many incentives for a bullish insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Many empirical studies have demonstrated the useful potential of this tactic if piggybackers understand where to look (learn more here).

With these “truths” under our belt, we’re going to take a peek at the latest action regarding Eaton Corporation, PLC Ordinary Shares (NYSE:ETN).

Hedge fund activity in Eaton Corporation, PLC Ordinary Shares (NYSE:ETN)

In preparation for this quarter, a total of 45 of the hedge funds we track were bullish in this stock, a change of 32% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably.

When looking at the hedgies we track, Levin Capital Strategies, managed by John A. Levin, holds the biggest position in Eaton Corporation, PLC Ordinary Shares (NYSE:ETN). Levin Capital Strategies has a $229 million position in the stock, comprising 4.1% of its 13F portfolio. Coming in second is Christopher Medlock James of Partner Fund Management, with a $188.8 million position; the fund has 6.2% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Ken Griffin’s Citadel Investment Group, Glenn Russell Dubin’s Highbridge Capital Management and Thomas E. Claugus’s GMT Capital.

With a general bullishness amongst the heavyweights, some big names have jumped into Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) headfirst. Viking Global, managed by Andreas Halvorsen, established the largest position in Eaton Corporation, PLC Ordinary Shares (NYSE:ETN). Viking Global had 62.1 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $33.4 million investment in the stock during the quarter. The following funds were also among the new ETN investors: Alexander Mitchell’s Scopus Asset Management, Andrew Sandler’s Sandler Capital Management, and Charles Davidson’s Wexford Capital.

What do corporate executives and insiders think about Eaton Corporation, PLC Ordinary Shares (NYSE:ETN)?

Bullish insider trading is at its handiest when the company in question has seen transactions within the past six months. Over the last six-month time period, Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) has experienced zero unique insiders buying, and 9 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Eaton Corporation, PLC Ordinary Shares (NYSE:ETN). These stocks are REGAL-BELOIT CORPORATION (NYSE:RBC), Nidec Corporation (ADR) (NYSE:NJ), AMETEK, Inc. (NYSE:AME), Rockwell Automation (NYSE:ROK), and ABB Ltd (ADR) (NYSE:ABB). This group of stocks are in the 0 industry and their market caps resemble ETN’s market cap.

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