HDFC Bank Limited (ADR) (NYSE:HDB) shareholders have witnessed an increase in enthusiasm from smart money recently.
According to most market participants, hedge funds are viewed as underperforming, old financial tools of the past. While there are greater than 8000 funds in operation at the moment, we choose to focus on the top tier of this group, around 450 funds. It is widely believed that this group controls the lion's share of the hedge fund industry's total capital, and by monitoring their top picks, we have figured out a few investment strategies that have historically outpaced 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 began to 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 (check out a sample of our picks).
Equally as beneficial, optimistic insider trading sentiment is a second way to parse down the marketplace. Just as you'd expect, there are a number of incentives for a corporate insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this tactic if investors understand where to look (learn more here).
Consequently, let's take a peek at the latest action surrounding HDFC Bank Limited (ADR) (NYSE:HDB).
At year's end, a total of 17 of the hedge funds we track held long positions in this stock, a change of 55% from one quarter earlier. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly.
When looking at the hedgies we track, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in HDFC Bank Limited (ADR) (NYSE:HDB). Fisher Asset Management has a $130 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which held a $26 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, D. E. Shaw's D E Shaw and Israel Englander's Millennium Management.
With a general bullishness amongst the heavyweights, some big names have jumped into HDFC Bank Limited (ADR) (NYSE:HDB) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in HDFC Bank Limited (ADR) (NYSE:HDB). Arrowstreet Capital had 13 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group, David Costen Haley's HBK Investments, and Thomas Bailard's Bailard Inc.
Bullish insider trading is at its handiest when the company in question has experienced transactions within the past 180 days. Over the last six-month time period, HDFC Bank Limited (ADR) (NYSE:HDB) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
With the results shown by our strategies, everyday investors must always pay attention to hedge fund and insider trading activity, and HDFC Bank Limited (ADR) (NYSE:HDB) is no exception.
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.