Red Hat, Inc. (NYSE:RHT) was in 25 hedge funds' portfolio at the end of December. RHT investors should pay attention to a decrease in enthusiasm from smart money of late. There were 29 hedge funds in our database with RHT holdings at the end of the previous quarter.
If you'd ask most shareholders, hedge funds are seen as unimportant, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey choose to focus on the elite of this club, close to 450 funds. Most estimates calculate that this group has its hands on the majority of the hedge fund industry's total asset base, and by tracking their highest performing stock picks, we have unearthed a number of investment strategies that have historically outpaced 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 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 the details here).
Equally as important, optimistic insider trading sentiment is a second way to break down the marketplace. Obviously, there are a variety of stimuli for a corporate insider to cut shares of his or her company, but just one, very simple reason why they would initiate a purchase. Several academic studies have demonstrated the impressive potential of this strategy if investors know where to look (learn more here).
Keeping this in mind, we're going to take a peek at the latest action regarding Red Hat, Inc. (NYSE:RHT).
In preparation for this year, a total of 25 of the hedge funds we track held long positions in this stock, a change of -14% from one quarter earlier. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully.
When looking at the hedgies we track, Panayotis æTakisÆ Sparaggis's Alkeon Capital Management had the most valuable position in Red Hat, Inc. (NYSE:RHT), worth close to $182 million, accounting for 5.4% of its total 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $69 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Brett Barakett's Tremblant Capital, Noam Gottesman's GLG Partners and Joe DiMenna's ZWEIG DIMENNA PARTNERS.
Due to the fact that Red Hat, Inc. (NYSE:RHT) has witnessed a declination in interest from the smart money, we can see that there was a specific group of fund managers who sold off their full holdings in Q4. Interestingly, Brett Barakett's Tremblant Capital dropped the biggest investment of all the hedgies we key on, worth an estimated $40 million in call options. Daniel Benton's fund, Andor Capital Management, also sold off its stock, about $28 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds in Q4.
Insider purchases made by high-level executives is most useful when the company we're looking at has experienced transactions within the past 180 days. Over the last six-month time period, Red Hat, Inc. (NYSE:RHT) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).
With the results demonstrated by Insider Monkey's research, everyday investors must always monitor hedge fund and insider trading activity, and Red Hat, Inc. (NYSE:RHT) is an important part of this process.
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