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Hedge Funds Are Selling Jefferies Group, Inc. (NYSE:JEF)

Is Jefferies Group, Inc. (NYSE:JEF) the right pick for your portfolio? Prominent investors are taking a bearish view. The number of long hedge fund bets were cut by 2 lately.

Jefferies Group, Inc. (NYSE:JEF)

To most investors, hedge funds are perceived as unimportant, outdated investment tools of years past. While there are over 8000 funds in operation today, we hone in on the bigwigs of this group, around 450 funds. Most estimates calculate that this group has its hands on the majority of the hedge fund industry’s total capital, and by watching their top picks, we have formulated a number of investment strategies that have historically outstripped Mr. 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 started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Just as beneficial, optimistic insider trading activity is another way to parse down the stock market universe. As the old adage goes: there are a number of stimuli for an insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Several empirical studies have demonstrated the market-beating potential of this strategy if “monkeys” understand where to look (learn more here).

With these “truths” under our belt, it’s important to take a glance at the recent action surrounding Jefferies Group, Inc. (NYSE:JEF).

Hedge fund activity in Jefferies Group, Inc. (NYSE:JEF)

Heading into 2013, a total of 19 of the hedge funds we track held long positions in this stock, a change of -10% from the third quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings considerably.

When looking at the hedgies we track, Ian Cumming and Joseph Steinberg’s Leucadia National had the biggest position in Jefferies Group, Inc. (NYSE:JEF), worth close to $1.077 billion, comprising 97% of its total 13F portfolio. Coming in second is Alpine Associates, managed by Robert Emil Zoellner, which held a $78 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Other hedge funds that are bullish include Bruce Berkowitz’s Fairholme (FAIRX), Clint Carlson’s Carlson Capital and Cliff Asness’s AQR Capital Management.

Seeing as Jefferies Group, Inc. (NYSE:JEF) has experienced bearish sentiment from hedge fund managers, logic holds that there exists a select few hedge funds who sold off their positions entirely at the end of the year. Intriguingly, Brian Taylor’s Pine River Capital Management dumped the biggest position of all the hedgies we key on, totaling close to $14 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund sold off about $12 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds at the end of the year.

How are insiders trading Jefferies Group, Inc. (NYSE:JEF)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company we’re looking at has experienced transactions within the past six months. Over the last half-year time period, Jefferies Group, Inc. (NYSE:JEF) has experienced 1 unique insiders buying, and 1 insider sales (see the details of insider trades here).

With the results shown by Insider Monkey’s strategies, everyday investors should always keep an eye on hedge fund and insider trading sentiment, and Jefferies Group, Inc. (NYSE:JEF) applies perfectly to this mantra.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

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.

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