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Here is What Hedge Funds Think About SPDR Gold Trust (ETF) (GLD)

Is SPDR Gold Trust (ETF) (NYSEARCA:GLD) undervalued? Investors who are in the know are taking a bearish view. The number of long hedge fund bets went down by 6 recently.

To most traders, hedge funds are viewed as unimportant, outdated investment vehicles of the past. While there are over 8000 funds trading at present, we look at the bigwigs of this group, about 450 funds. It is estimated that this group oversees the lion’s share of the smart money’s total asset base, and by keeping an eye on their best stock picks, we have come up with a few investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year 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 outpaced the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Just as integral, optimistic insider trading activity is another way to parse down the investments you’re interested in. As the old adage goes: there are many incentives for an insider to drop shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the impressive potential of this strategy if “monkeys” know where to look (learn more here).

With these “truths” under our belt, we’re going to take a look at the latest action surrounding SPDR Gold Trust (ETF) (NYSEARCA:GLD).

What have hedge funds been doing with SPDR Gold Trust (ETF) (NYSEARCA:GLD)?

At quarter’s end, a total of 67 of the hedge funds we track were bullish in this stock, a change of -8% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings meaningfully.

When looking at the hedgies we track, John Paulson’s Paulson & Co had the biggest position in SPDR Gold Trust (ETF) (NYSEARCA:GLD), worth close to $3.3728 billion, comprising 19% of its total 13F portfolio. Coming in second is Fir Tree, managed by Jeffrey Tannenbaum, which held a $478.8 million call position; the fund has 8.9% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Jean-Marie Eveillard’s First Eagle Investment Management, and Stanley Druckenmiller’s Duquesne Capital.

Seeing as SPDR Gold Trust (ETF) (NYSEARCA:GLD) has experienced a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds that elected to cut their entire stakes last quarter. At the top of the heap, Kenneth Mario Garschina’s Mason Capital Management said goodbye to the biggest stake of the 450+ funds we key on, worth an estimated $4260.9 million in call options, and Peter Franklin Palmedo of Sun Valley Gold was right behind this move, as the fund cut about $1295.8 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 6 funds last quarter.

Insider trading activity in SPDR Gold Trust (ETF) (NYSEARCA:GLD)

Insider buying is particularly usable when the primary stock in question has experienced transactions within the past half-year. Over the latest half-year time period, SPDR Gold Trust (ETF) (NYSEARCA:GLD) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Click here to learn why you should track hedge funds

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