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Hedge Funds Are Selling Walter Energy, Inc. (WLT)

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Walter Energy, Inc. (NYSE:WLT) investors: listen up.

To many of your peers, hedge funds are perceived as overrated, outdated financial vehicles of a forgotten age. Although there are In excess of 8,000 hedge funds with their doors open in present day, this site looks at the leaders of this group, around 525 funds. It is widely held that this group has its hands on the majority of the hedge fund industry’s total capital, and by watching their highest quality investments, we’ve unsheathed a number of investment strategies that have historically beaten the broader indices. 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 began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Just as key, positive insider trading sentiment is another way to look at the world of equities. Obviously, there are lots of stimuli for an insider to get rid of shares of his or her company, but only one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the market-beating potential of this strategy if piggybackers know where to look (learn more here).

Now that that’s out of the way, it’s important to study the recent info surrounding Walter Energy, Inc. (NYSE:WLT).

What have hedge funds been doing with Walter Energy, Inc. (NYSE:WLT)?

Heading into Q3, a total of 21 of the hedge funds we track were bullish in this stock, a change of -19% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully.

Walter Energy, Inc. (NYSE:WLT)Out of the hedge funds we follow, SAC Capital Advisors, managed by Steven Cohen, holds the largest position in Walter Energy, Inc. (NYSE:WLT). SAC Capital Advisors has a $33.4 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Don Morgan of Brigade Capital, with a $17.7 million position; 0.6% of its 13F portfolio is allocated to the company. Some other peers that are bullish include D. E. Shaw’s D E Shaw, Matthew Halbower’s Pentwater Capital Management and Clint Carlson’s Carlson Capital.

As Walter Energy, Inc. (NYSE:WLT) has faced dropping sentiment from the smart money’s best and brightest, it’s easy to see that there lies a certain “tier” of money managers that slashed their full holdings heading into Q2. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dumped the largest position of the 450+ funds we track, totaling an estimated $63.9 million in stock. Robert Bishop’s fund, Impala Asset Management, also sold off its stock, about $54.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 5 funds heading into Q2.

Insider trading activity in Walter Energy, Inc. (NYSE:WLT)

Legal insider trading, particularly when it’s bullish, is particularly usable when the primary stock in question has experienced transactions within the past 180 days. Over the last six-month time period, Walter Energy, Inc. (NYSE:WLT) has experienced 13 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to Walter Energy, Inc. (NYSE:WLT). These stocks are Alliance Resource Partners, L.P. (NASDAQ:ARLP), PVR Partners LP (NYSE:PVR), Stillwater Mining Company (NYSE:SWC), HudBay Minerals Inc Ord Shs (NYSE:HBM), and Alpha Natural Resources, Inc. (NYSE:ANR). This group of stocks belong to the industrial metals & minerals industry and their market caps match WLT’s market cap.

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