Eli Lilly & Co. (NYSE:LLY) investors should pay attention to a decrease in support from the world's most elite money managers lately.
To most shareholders, hedge funds are seen as slow, outdated investment vehicles of the past. While there are greater than 8000 funds in operation at the moment, we at Insider Monkey hone in on the elite of this group, close to 450 funds. It is estimated that this group controls the lion's share of all hedge funds' total capital, and by watching their top investments, we have deciphered 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 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 outclassed the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).
Equally as beneficial, positive insider trading activity is a second way to parse down the stock market universe. Just as you'd expect, there are plenty of incentives for an executive to get rid of shares of his or her company, but only one, very clear reason why they would buy. Various empirical studies have demonstrated the impressive potential of this tactic if investors know what to do (learn more here).
Keeping this in mind, it's important to take a glance at the latest action encompassing Eli Lilly & Co. (NYSE:LLY).
At year's end, a total of 34 of the hedge funds we track were long in this stock, a change of -15% from the third quarter. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings considerably.
Of the funds we track, Jim Simons's Renaissance Technologies had the largest position in Eli Lilly & Co. (NYSE:LLY), worth close to $400 million, comprising 1.2% of its total 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $138 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other peers that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Ken Griffin's Citadel Investment Group and D. E. Shaw's D E Shaw.
Judging by the fact that Eli Lilly & Co. (NYSE:LLY) has faced falling interest from hedge fund managers, we can see that there was a specific group of hedgies that slashed their full holdings heading into 2013. At the top of the heap, Andreas Halvorsen's Viking Global said goodbye to the biggest investment of the "upper crust" of funds we key on, worth an estimated $234 million in stock., and Alan Fournier of Pennant Capital Management was right behind this move, as the fund dumped about $54 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 6 funds heading into 2013.
Insider buying is particularly usable when the company in question has experienced transactions within the past 180 days. Over the last six-month time frame, Eli Lilly & Co. (NYSE:LLY) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).
With the results shown by Insider Monkey's strategies, everyday investors must always keep an eye on hedge fund and insider trading activity, and Eli Lilly & Co. (NYSE:LLY) applies perfectly to this mantra.
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.