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Hedge Funds Are Selling The Dow Chemical Company (NYSE:DOW)

The Dow Chemical Company (NYSE:DOW) was in 18 hedge funds’ portfolio at the end of the fourth quarter of 2012. DOW has experienced a decrease in support from the world’s most elite money managers recently. There were 19 hedge funds in our database with DOW positions at the end of the previous quarter.

In the eyes of most stock holders, hedge funds are viewed as unimportant, old financial tools of the past. While there are over 8000 funds with their doors open at present, we hone in on the leaders of this club, about 450 funds. Most estimates calculate that this group oversees the majority of the smart money’s total capital, and by tracking their best equity investments, we have spotted a few investment strategies that have historically outpaced Mr. 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

The Dow Chemical Company (NYSE:DOW)

Just as beneficial, bullish insider trading sentiment is a second way to parse down the investments you’re interested in. Just as you’d expect, there are many incentives for an insider to sell shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this tactic if shareholders know where to look (learn more here).

Keeping this in mind, we’re going to take a gander at the latest action surrounding The Dow Chemical Company (NYSE:DOW).

What does the smart money think about The Dow Chemical Company (NYSE:DOW)?

At year’s end, a total of 18 of the hedge funds we track were long in this stock, a change of -5% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly.

Of the funds we track, D E Shaw, managed by D. E. Shaw, holds the largest position in The Dow Chemical Company (NYSE:DOW). D E Shaw has a $83 million call position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Steven Cohen of SAC Capital Advisors, with a $70 million position; 0.5% of its 13F portfolio is allocated to the stock. Other hedgies that are bullish include Ken Griffin’s Citadel Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and Clint Carlson’s Carlson Capital.

Because The Dow Chemical Company (NYSE:DOW) has experienced a declination in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies that decided to sell off their positions entirely last quarter. Interestingly, Jim Simons’s Renaissance Technologies dropped the biggest position of the “upper crust” of funds we watch, totaling about $67 million in stock., and Cliff Asness of AQR Capital Management was right behind this move, as the fund cut about $2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.

Insider trading activity in The Dow Chemical Company (NYSE:DOW)

Insider trading activity, especially when it’s bullish, is particularly usable when the company in question has experienced transactions within the past 180 days. Over the last half-year time frame, The Dow Chemical Company (NYSE:DOW) has experienced zero unique insiders buying, and 7 insider sales (see the details of insider trades here).

With the results exhibited by Insider Monkey’s studies, retail investors should always watch hedge fund and insider trading sentiment, and The Dow Chemical Company (NYSE:DOW) shareholders fit into this picture quite nicely.

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

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