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Hedge Funds Aren’t Crazy About Corrections Corp Of America (NYSE:CXW) Anymore

Is Corrections Corp Of America (NYSE:CXW) an attractive stock to buy now? Hedge funds are taking a bearish view. The number of long hedge fund positions dropped by 4 in recent months.

Corrections Corp Of America

According to most market participants, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are over 8000 funds trading today, we hone in on the top tier of this group, around 450 funds. It is widely believed that this group has its hands on most of the smart money’s total capital, and by tracking their highest performing picks, we have unearthed a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a 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 topped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Equally as key, bullish insider trading sentiment is another way to break down the world of equities. Obviously, there are lots of incentives for an insider to downsize shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various empirical studies have demonstrated the valuable potential of this tactic if you understand what to do (learn more here).

Consequently, it’s important to take a look at the recent action regarding Corrections Corp Of America (NYSE:CXW).

What does the smart money think about Corrections Corp Of America (NYSE:CXW)?

At the end of the fourth quarter, a total of 23 of the hedge funds we track held long positions in this stock, a change of -15% from the third quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly.

When looking at the hedgies we track, Marcato Capital Management, managed by Richard McGuire, holds the most valuable position in Corrections Corp Of America (NYSE:CXW). Marcato Capital Management has a $141 million position in the stock, comprising 18.3% of its 13F portfolio. Sitting at the No. 2 spot is Corvex Capital, managed by Keith Meister, which held a $102 million position; the fund has 4.8% of its 13F portfolio invested in the stock. Some other peers with similar optimism include James Dinan’s York Capital Management, Steven Cohen’s SAC Capital Advisors and John Bader’s Halcyon Asset Management.

Judging by the fact that Corrections Corp Of America (NYSE:CXW) has witnessed falling interest from the aggregate hedge fund industry, we can see that there is a sect of money managers that slashed their entire stakes at the end of the year. Intriguingly, Keith Meister’s Corvex Capital cut the largest stake of the “upper crust” of funds we watch, totaling about $33 million in call options, and Tom Sandell of Sandell Asset Management was right behind this move, as the fund cut about $9 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 4 funds at the end of the year.

Insider trading activity in Corrections Corp Of America (NYSE:CXW)

Insider purchases made by high-level executives is at its handiest when the company we’re looking at has seen transactions within the past half-year. Over the latest six-month time period, Corrections Corp Of America (NYSE:CXW) has seen zero unique insiders buying, and 8 insider sales (see the details of insider trades here).

With the results demonstrated by Insider Monkey’s strategies, retail investors should always watch hedge fund and insider trading activity, and Corrections Corp Of America (NYSE:CXW) shareholders fit into this picture quite nicely.

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

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