Illinois Tool Works Inc. (NYSE:ITW) investors should be aware of a decrease in activity from the world’s largest hedge funds lately.
If you’d ask most shareholders, hedge funds are perceived as underperforming, old investment tools of the past. While there are over 8000 funds trading today, we at Insider Monkey hone in on the upper echelon of this club, about 450 funds. It is widely believed that this group controls the majority of the smart money’s total capital, and by paying attention to their best picks, we have determined a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Equally as integral, positive insider trading sentiment is a second way to break down the financial markets. There are a variety of reasons for an upper level exec to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the valuable potential of this tactic if “monkeys” know what to do (learn more here).
With all of this in mind, it’s important to take a look at the key action surrounding Illinois Tool Works Inc. (NYSE:ITW).
What does the smart money think about Illinois Tool Works Inc. (NYSE:ITW)?
At the end of the first quarter, a total of 25 of the hedge funds we track held long positions in this stock, a change of -4% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially.
According to our comprehensive database, Relational Investors, managed by Ralph V. Whitworth, holds the largest position in Illinois Tool Works Inc. (NYSE:ITW). Relational Investors has a $610.1 million position in the stock, comprising 11.7% of its 13F portfolio. The second largest stake is held by Sandy Nairn of Edinburgh Partners, with a $132.3 million position; 8.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include Ric Dillon’s Diamond Hill Capital, John W. Rogers’s Ariel Investments and Ricky Sandler’s Eminence Capital.
Due to the fact that Illinois Tool Works Inc. (NYSE:ITW) has faced a declination in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers that elected to cut their entire stakes heading into Q2. Intriguingly, Steven Cohen’s SAC Capital Advisors sold off the largest stake of the “upper crust” of funds we track, valued at about $3 million in call options, and Anil Stevens and Glenn Shapiro of Parameter Capital Management was right behind this move, as the fund cut about $2.7 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds heading into Q2.
How are insiders trading Illinois Tool Works Inc. (NYSE:ITW)?
Bullish insider trading is best served when the company in question has experienced transactions within the past 180 days. Over the last six-month time frame, Illinois Tool Works Inc. (NYSE:ITW) has experienced zero unique insiders buying, and 7 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Illinois Tool Works Inc. (NYSE:ITW). These stocks are Ingersoll-Rand PLC (NYSE:IR), Danaher Corporation (NYSE:DHR), Cummins Inc. (NYSE:CMI), and Koninklijke Philips Electronics NV (ADR) (NYSE:PHG). This group of stocks are in the diversified machinery industry and their market caps are similar to ITW’s market cap.