Tyco International Ltd. (NYSE:TYC) investors should be aware of a decrease in support from the world's most elite money managers of late.
To most market participants, hedge funds are seen as worthless, old financial vehicles of the past. While there are more than 8000 funds with their doors open at the moment, we hone in on the elite of this club, close to 450 funds. It is estimated that this group controls the lion's share of the hedge fund industry's total capital, and by watching their highest performing stock picks, we have identified a few investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outpaced 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 topped the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).
Equally as beneficial, bullish insider trading sentiment is another way to break down the world of equities. As the old adage goes: there are plenty of incentives for a bullish insider to downsize shares of his or her company, but only one, very simple reason why they would behave bullishly. Several academic studies have demonstrated the useful potential of this strategy if you know what to do (learn more here).
Keeping this in mind, let's take a gander at the recent action regarding Tyco International Ltd. (NYSE:TYC).
At year's end, a total of 40 of the hedge funds we track were bullish in this stock, a change of -31% 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 upping their stakes meaningfully.
When looking at the hedgies we track, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the largest position in Tyco International Ltd. (NYSE:TYC). Iridian Asset Management has a $207 million billion position in the stock, comprising 3.4% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $178 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include Daniel S. Och's OZ Management, Jean-Marie Eveillard's First Eagle Investment Management and Phill Gross and Robert Atchinson's Adage Capital Management.
Judging by the fact that Tyco International Ltd. (NYSE:TYC) has experienced bearish sentiment from hedge fund managers, it's safe to say that there were a few hedge funds that slashed their entire stakes at the end of the year. At the top of the heap, Kenneth Mario Garschina's Mason Capital Management dumped the largest stake of the 450+ funds we monitor, comprising an estimated $184 million in stock.. Cliff Asness's fund, AQR Capital Management, also dropped its stock, about $163 million worth. These moves are important to note, as total hedge fund interest was cut by 18 funds at the end of the year.
Insider trading activity, especially when it's bullish, is at its handiest when the company in question has experienced transactions within the past six months. Over the last six-month time period, Tyco International Ltd. (NYSE:TYC) has seen 1 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).
With the returns demonstrated by our studies, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Tyco International Ltd. (NYSE:TYC) shareholders fit into this picture quite nicely.
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.