Cummins Inc. (NYSE:CMI) was in 34 hedge funds’ portfolio at the end of the first quarter of 2013. CMI has experienced a decrease in enthusiasm from smart money recently. There were 41 hedge funds in our database with CMI positions at the end of the previous quarter.
In the eyes of most market participants, hedge funds are seen as worthless, old investment vehicles of the past. While there are over 8000 funds in operation at the moment, we choose to focus on the bigwigs of this group, about 450 funds. Most estimates calculate that this group controls most of the smart money’s total asset base, and by watching their best picks, we have unsheathed a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually 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 topped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Just as key, optimistic insider trading activity is a second way to break down the marketplace. Obviously, there are lots of stimuli for an executive to cut shares of his or her company, but just one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the market-beating potential of this strategy if piggybackers know where to look (learn more here).
Keeping this in mind, we’re going to take a peek at the recent action surrounding Cummins Inc. (NYSE:CMI).
How are hedge funds trading Cummins Inc. (NYSE:CMI)?
Heading into Q2, a total of 34 of the hedge funds we track were bullish in this stock, a change of -17% from the previous quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings significantly.
When looking at the hedgies we track, Christopher Medlock James’s Partner Fund Management had the biggest position in Cummins Inc. (NYSE:CMI), worth close to $170.9 million, accounting for 5.7% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $146.3 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedgies that hold long positions include Donald Chiboucis’s Columbus Circle Investors, Israel Englander’s Millennium Management and Phill Gross and Robert Atchinson’s Adage Capital Management.
Due to the fact that Cummins Inc. (NYSE:CMI) has experienced a declination in interest from the smart money, we can see that there exists a select few hedgies that slashed their full holdings last quarter. It’s worth mentioning that Panayotis Takis Sparaggis’s Alkeon Capital Management cut the largest position of the “upper crust” of funds we monitor, totaling an estimated $56.7 million in stock.. Joe DiMenna’s fund, ZWEIG DIMENNA PARTNERS, also dumped its stock, about $17.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 7 funds last quarter.
How are insiders trading Cummins Inc. (NYSE:CMI)?
Insider buying is best served when the primary stock in question has seen transactions within the past 180 days. Over the latest half-year time frame, Cummins Inc. (NYSE:CMI) has experienced zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Cummins Inc. (NYSE:CMI). These stocks are Roper Industries, Inc. (NYSE:ROP), Ingersoll-Rand PLC (NYSE:IR), Koninklijke Philips Electronics NV (ADR) (NYSE:PHG), Illinois Tool Works Inc. (NYSE:ITW), and Kubota Corp (ADR) (NYSE:KUB). This group of stocks belong to the diversified machinery industry and their market caps resemble CMI’s market cap.