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Hedge Funds Are Dumping Illinois Tool Works Inc. (ITW)

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Is it worth taking profits at Illinois Tool Works Inc. (NYSE:ITW)?

To many investors, hedge funds are perceived as overrated, old investment vehicles of a period lost to current times. Although there are In excess of 8,000 hedge funds with their doors open in present day, this site focuses on the bigwigs of this group, about 525 funds. It is widely held that this group oversees most of the hedge fund industry’s total capital, and by monitoring their best equity investments, we’ve spotted a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year 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 33 percentage points in 11 months (find the details here).

Equally as useful, bullish insider trading activity is a second way to look at the investments you’re interested in. As the old adage goes: there are a variety of incentives for a bullish insider to downsize shares of his or her company, but just one, very clear reason why they would behave bullishly. Several empirical studies have demonstrated the impressive potential of this method if shareholders understand what to do (learn more here).

Thus, let’s study the recent info for Illinois Tool Works Inc. (NYSE:ITW).

How are hedge funds trading Illinois Tool Works Inc. (NYSE:ITW)?

Heading into Q3, a total of 24 of the hedge funds we track were long in this stock, a change of -4% from the first quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially.

Illinois Tool Works Inc. (NYSE:ITW)According to our 13F database, Harris Associates, managed by Natixis Global Asset Management, holds the most valuable position in Illinois Tool Works Inc. (NYSE:ITW). Harris Associates has a $1.162 billion position in the stock, comprising 2.4% of its 13F portfolio. On Harris Associates’s heels is Relational Investors, managed by Ralph V. Whitworth, which held a $692.5 million position; the fund has 13% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Ric Dillon’s Diamond Hill Capital, Sandy Nairn’s Edinburgh Partners and Phill Gross and Robert Atchinson’s Adage Capital Management.

Judging by the fact that Illinois Tool Works Inc. (NYSE:ITW) has experienced dropping sentiment from the top-tier hedge fund industry, we can see that there was a specific group of fund managers that elected to cut their full holdings heading into Q2. Intriguingly, Matthew Tewksbury’s Stevens Capital Management cut the largest investment of the “upper crust” of funds we monitor, worth close to $20.6 million in stock, and Larry Foley and Paul Farrell of Bronson Point Partners was right behind this move, as the fund dropped about $18.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q2.

What have insiders been doing with Illinois Tool Works Inc. (NYSE:ITW)?

Insider buying is best served when the company in focus has experienced transactions within the past six months. Over the latest half-year time frame, Illinois Tool Works Inc. (NYSE:ITW) has experienced zero unique insiders purchasing, and 10 insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Illinois Tool Works Inc. (NYSE:ITW). These stocks are Ingersoll-Rand PLC (NYSE:IR), Danaher Corporation (NYSE:DHR), Kubota Corp (ADR) (NYSE:KUB), Cummins Inc. (NYSE:CMI), and Koninklijke Philips Electronics NV (ADR) (NYSE:PHG). This group of stocks are in the diversified machinery industry and their market caps resemble ITW’s market cap.

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