Domtar Corp (USA) (NYSE:UFS) investors should pay attention to a decrease in enthusiasm from smart money lately.
If you'd ask most investors, hedge funds are viewed as underperforming, outdated investment vehicles of the past. While there are over 8000 funds in operation at present, we at Insider Monkey hone in on the leaders of this group, around 450 funds. It is estimated that this group has its hands on most of the smart money's total capital, and by monitoring their top stock picks, we have found a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).
Equally as integral, optimistic insider trading activity is another way to parse down the financial markets. As the old adage goes: there are many stimuli for an upper level exec to downsize shares of his or her company, but just one, very simple reason why they would buy. Various empirical studies have demonstrated the impressive potential of this tactic if you know what to do (learn more here).
With these "truths" under our belt, it's important to take a peek at the key action encompassing Domtar Corp (USA) (NYSE:UFS).
Heading into 2013, a total of 21 of the hedge funds we track were long in this stock, a change of -5% from one quarter earlier. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably.
According to our comprehensive database, Jeffrey Gates's Gates Capital Management had the largest position in Domtar Corp (USA) (NYSE:UFS), worth close to $76 million, comprising 4.7% of its total 13F portfolio. On Gates Capital Management's heels is Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, which held a $55 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Some other peers that are bullish include John Burbank's Passport Capital, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital and Cliff Asness's AQR Capital Management.
Seeing as Domtar Corp (USA) (NYSE:UFS) has experienced declining sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of hedge funds that decided to sell off their entire stakes in Q4. Intriguingly, Craig C. Albert's Sheffield Asset Management sold off the biggest investment of all the hedgies we monitor, totaling an estimated $9 million in stock., and SAC Subsidiary of CR Intrinsic Investors was right behind this move, as the fund cut about $1 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds in Q4.
Bullish insider trading is most useful when the company in question has seen transactions within the past 180 days. Over the latest 180-day time period, Domtar Corp (USA) (NYSE:UFS) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).
With the results exhibited by Insider Monkey's time-tested strategies, everyday investors should always pay attention to hedge fund and insider trading sentiment, and Domtar Corp (USA) (NYSE:UFS) is an important part of this process.
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.