To many of your fellow readers, hedge funds are viewed as overrated, old financial tools of an era lost to time. Although there are In excess of 8,000 hedge funds in operation in present day, Insider Monkey focuses on the elite of this group, around 525 funds. It is assumed that this group oversees most of all hedge funds' total capital, and by tracking their best investments, we've figured out a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a 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 outperformed the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Equally as necessary, optimistic insider trading activity is another way to look at the marketplace. Obviously, there are plenty of motivations for an insider to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the impressive potential of this method if you know what to do (learn more here).
Keeping this in mind, we're going to discuss the recent info surrounding The Southern Company (NYSE:SO).
Heading into Q3, a total of 20 of the hedge funds we track held long positions in this stock, a change of 43% from one quarter earlier. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially.
When using filings from the hedgies we track, David Harding's Winton Capital Management had the largest position in The Southern Company (NYSE:SO), worth close to $22.5 million, comprising 0.3% of its total 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $17.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Israel Englander's Millennium Management, Michael Messner's Seminole Capital (Investment Mgmt) and Matthew Tewksbury's Stevens Capital Management.
With a general bullishness amongst the titans, specific money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, established the largest position in The Southern Company (NYSE:SO). Winton Capital Management had 22.5 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also initiated a $17.6 million position during the quarter. The other funds with brand new SO positions are Israel Englander's Millennium Management, Michael Messner's Seminole Capital (Investment Mgmt), and Matthew Tewksbury's Stevens Capital Management.
Bullish insider trading is at its handiest when the company in question has seen transactions within the past six months. Over the latest 180-day time period, The Southern Company (NYSE:SO) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
We'll also review the relationship between both of these indicators in other stocks similar to The Southern Company (NYSE:SO). These stocks are PG&E Corporation (NYSE:PCG), American Electric Power Company, Inc. (NYSE:AEP), Duke Energy Corp (NYSE:DUK), NextEra Energy, Inc. (NYSE:NEE), and Dominion Resources, Inc. (NYSE:D). All of these stocks are in the electric utilities industry and their market caps are similar to SO's market cap.