Level 3 Communications, Inc. (NYSE:LVLT) was in 16 hedge funds' portfolio at the end of the fourth quarter of 2012. LVLT has seen a decrease in enthusiasm from smart money of late. There were 23 hedge funds in our database with LVLT holdings at the end of the previous quarter.
To most investors, hedge funds are perceived as slow, outdated investment tools of yesteryear. While there are greater than 8000 funds in operation today, we hone in on the masters of this group, about 450 funds. It is estimated that this group has its hands on most of all hedge funds' total capital, and by watching their highest performing investments, we have formulated a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum 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 25 percentage points in 6.5 month (check out a sample of our picks).
Just as key, bullish insider trading activity is a second way to parse down the world of equities. Obviously, there are a variety of stimuli for a bullish insider to downsize shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this tactic if investors know where to look (learn more here).
With all of this in mind, we're going to take a gander at the key action surrounding Level 3 Communications, Inc. (NYSE:LVLT).
In preparation for this year, a total of 16 of the hedge funds we track were long in this stock, a change of -30% from one quarter earlier. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their stakes considerably.
When looking at the hedgies we track, Southeastern Asset Management, managed by Mason Hawkins, holds the largest position in Level 3 Communications, Inc. (NYSE:LVLT). Southeastern Asset Management has a $1.079 billion position in the stock, comprising 4.7% of its 13F portfolio. The second largest stake is held by Fairfax Financial Holdings, managed by Prem Watsa, which held a $299 million position; the fund has 11.9% of its 13F portfolio invested in the stock. Some other peers that are bullish include Michael Johnston's Steelhead Partners, Keith Meister's Corvex Capital and Steven Cohen's SAC Capital Advisors.
Because Level 3 Communications, Inc. (NYSE:LVLT) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few hedge funds that decided to sell off their positions entirely in Q4. Intriguingly, Scott McLellan's Marble Arch Investments said goodbye to the biggest position of the "upper crust" of funds we monitor, totaling about $29 million in stock., and Christopher Lord of Criterion Capital was right behind this move, as the fund cut about $19 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 7 funds in Q4.
Insider trading activity, especially when it's bullish, is best served when the company in question has seen transactions within the past half-year. Over the last half-year time period, Level 3 Communications, Inc. (NYSE:LVLT) has seen zero unique insiders buying, and 12 insider sales (see the details of insider trades here).
With the results shown by the aforementioned strategies, everyday investors should always monitor hedge fund and insider trading sentiment, and Level 3 Communications, Inc. (NYSE:LVLT) is an important part of this process.
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