Chevron Corporation (NYSE:CVX) investors should pay attention to a decrease in activity from the world's largest hedge funds in recent months.
In the eyes of most market participants, hedge funds are perceived as worthless, old investment tools of years past. While there are more than 8000 funds with their doors open today, we hone in on the upper echelon of this club, around 450 funds. Most estimates calculate that this group has its hands on most of the smart money's total asset base, and by watching their top equity investments, we have found a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy beat 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).
Just as beneficial, optimistic insider trading sentiment is another way to break down the world of equities. There are many incentives for an executive to sell shares of his or her company, but only one, very obvious reason why they would buy. Many academic studies have demonstrated the impressive potential of this strategy if investors know what to do (learn more here).
Keeping this in mind, let's take a look at the latest action regarding Chevron Corporation (NYSE:CVX).
In preparation for this year, a total of 42 of the hedge funds we track held long positions in this stock, a change of -14% from one quarter earlier. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably.
According to our comprehensive database, Ken Fisher's Fisher Asset Management had the biggest position in Chevron Corporation (NYSE:CVX), worth close to $397 million, accounting for 1.1% of its total 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $311 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Cliff Asness's AQR Capital Management, Bill Miller's Legg Mason Capital Management and D. E. Shaw's D E Shaw.
Because Chevron Corporation (NYSE:CVX) has experienced falling interest from the smart money, it's easy to see that there was a specific group of money managers that decided to sell off their entire stakes in Q4. It's worth mentioning that Ken Griffin's Citadel Investment Group dumped the largest position of all the hedgies we monitor, comprising close to $92 million in stock.. Stanley Druckenmiller's fund, Duquesne Capital, also said goodbye to its stock, about $88 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 7 funds in Q4.
Insider buying is most useful when the company in question has seen transactions within the past 180 days. Over the latest six-month time period, Chevron Corporation (NYSE:CVX) has seen 1 unique insiders purchasing, and zero insider sales (see the details of insider trades here).
With the results demonstrated by our strategies, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Chevron Corporation (NYSE:CVX) is an important part of this process.
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.