American Capital Ltd. (NASDAQ:ACAS) has seen a decrease in activity from the world's largest hedge funds lately.
To most market participants, hedge funds are viewed as worthless, outdated investment vehicles of years past. While there are more than 8000 funds in operation at present, we hone in on the masters of this group, around 450 funds. It is estimated that this group controls the lion's share of the hedge fund industry's total asset base, and by monitoring their best picks, we have uncovered a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually 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 topped the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).
Just as key, optimistic insider trading sentiment is a second way to parse down the stock market universe. Obviously, there are a variety of motivations for a corporate insider to drop shares of his or her company, but just one, very obvious reason why they would buy. Various academic studies have demonstrated the market-beating potential of this tactic if "monkeys" understand where to look (learn more here).
Now, we're going to take a peek at the latest action encompassing American Capital Ltd. (NASDAQ:ACAS).
Heading into 2013, a total of 21 of the hedge funds we track were bullish in this stock, a change of -5% from the third quarter. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings considerably.
According to our comprehensive database, Luxor Capital Group, managed by Christian Leone, holds the largest position in American Capital Ltd. (NASDAQ:ACAS). Luxor Capital Group has a $145 million position in the stock, comprising 5.1% of its 13F portfolio. Coming in second is Brian Taylor of Pine River Capital Management, with a $91 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Some other hedge funds with similar optimism include Cliff Asness's AQR Capital Management, John Paulson's Paulson & Co and Paul Singer's Elliott Management.
Because American Capital Ltd. (NASDAQ:ACAS) has faced a declination in interest from hedge fund managers, we can see that there was a specific group of fund managers that slashed their entire stakes in Q4. It's worth mentioning that James H. Litinsk's JHL Capital Group cut the biggest investment of all the hedgies we monitor, totaling about $27 million in stock.. Douglas Hirsch's fund, Seneca Capital, also dumped its stock, about $6 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds in Q4.
Insider trading activity, especially when it's bullish, is most useful when the company in focus has experienced transactions within the past half-year. Over the last 180-day time frame, American Capital Ltd. (NASDAQ:ACAS) has experienced zero unique insiders buying, and 9 insider sales (see the details of insider trades here).
With the returns shown by the aforementioned strategies, everyday investors should always pay attention to hedge fund and insider trading sentiment, and American Capital Ltd. (NASDAQ:ACAS) applies perfectly to this mantra.
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