Is Aetna Inc. (NYSE:AET) an outstanding investment today? The smart money is turning less bullish. The number of long hedge fund bets fell by 8 in recent months.
According to most market participants, hedge funds are viewed as slow, outdated investment tools of the past. While there are over 8000 funds trading at the moment, we choose to focus on the leaders of this club, around 450 funds. Most estimates calculate that this group oversees the lion's share of the smart money's total asset base, and by paying attention to their best equity investments, we have come up with a few investment strategies that have historically outperformed 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 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 the details here).
Just as key, optimistic insider trading sentiment is another way to parse down the stock market universe. Just as you'd expect, there are lots of reasons for a bullish insider to downsize shares of his or her company, but just one, very clear reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the impressive potential of this method if shareholders understand what to do (learn more here).
Keeping this in mind, let's take a gander at the latest action surrounding Aetna Inc. (NYSE:AET).
At year's end, a total of 45 of the hedge funds we track held long positions in this stock, a change of -15% from one quarter earlier. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly.
According to our comprehensive database, David Einhorn's Greenlight Capital had the largest position in Aetna Inc. (NYSE:AET), worth close to $301 million, accounting for 4.7% of its total 13F portfolio. The second largest stake is held by William B. Gray of Orbis Investment Management, with a $277 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Some other hedgies with similar optimism include Daniel S. Och's OZ Management, John Paulson's Paulson & Co and Paul ReederáandáEdward Shapiro's PAR Capital Management.
Seeing as Aetna Inc. (NYSE:AET) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few funds that elected to cut their entire stakes heading into 2013. At the top of the heap, Jeffrey Tannenbaum's Fir Tree sold off the biggest position of the 450+ funds we key on, totaling about $79 million in call options. James Dinan's fund, York Capital Management, also dropped its stock, about $53 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 8 funds heading into 2013.
Bullish insider trading is particularly usable when the company in focus has experienced transactions within the past six months. Over the last 180-day time period, Aetna Inc. (NYSE:AET) has experienced 1 unique insiders purchasing, and 8 insider sales (see the details of insider trades here).
With the results shown by our tactics, retail investors should always pay attention to hedge fund and insider trading activity, and Aetna Inc. (NYSE:AET) is no exception.
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.