Investment Technology Group (ITG): Smart Money’s Mixed on Knight Capital Group Inc. (KCG), What’s The Right Play?

Is Knight Capital Group Inc. (NYSE:KCG) the right pick for your portfolio? Prominent investors are becoming more confident. The number of long hedge fund positions advanced by 4 recently, and sentiment was also swirling in key peer Investment Technology Group (NYSE:ITG).

Knight Capital (KCG)To the average investor, there are a multitude of methods market participants can use to track stocks. Some of the most innovative are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the top fund managers can outperform the S&P 500 by a significant margin (see just how much).

Equally as beneficial, positive insider trading sentiment is another way to break down the investments you’re interested in. Just as you’d expect, there are lots of incentives for an insider to cut shares of his or her company, but only one, very clear reason why they would behave bullishly. Many empirical studies have demonstrated the impressive potential of this method if “monkeys” understand where to look (learn more here).

With these “truths” under our belt, let’s take a glance at the latest action surrounding Knight Capital Group Inc. (NYSE:KCG).

How have hedgies been trading Knight Capital Group Inc. (NYSE:KCG)?

Heading into 2013, a total of 13 of the hedge funds we track were long in this stock, a change of 44% from the previous quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially.

According to our comprehensive database, Robert Emil Zoellner’s Alpine Associates had the most valuable position in Knight Capital Group Inc. (NYSE:KCG), worth close to $12 million, accounting for 0.5% of its total 13F portfolio. On Alpine Associates’s heels is Ascend Capital, managed by Malcolm Fairbairn, which held a $7 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining hedge funds that are bullish include Philippe Jabre’s Jabre Capital Partners, John Arnold’s Centaurus Advisors and Matthew Halbower’s Pentwater Capital Management.

As aggregate interest increased, specific money managers have jumped into Knight Capital Group Inc. (NYSE:KCG) headfirst. Alpine Associates, managed by Robert Emil Zoellner, established the most outsized position in Knight Capital Group Inc. (NYSE:KCG). Alpine Associates had 12 million invested in the company at the end of the quarter. Malcolm Fairbairn’s Ascend Capital also initiated a $7 million position during the quarter. The following funds were also among the new KCG investors: Philippe Jabre’s Jabre Capital Partners, John Arnold’s Centaurus Advisors, and Matthew Halbower’s Pentwater Capital Management.

How are insiders trading Knight Capital Group Inc. (NYSE:KCG)?

Insider purchases made by high-level executives is most useful when the company in question has seen transactions within the past half-year. Over the latest 180-day time frame, Knight Capital Group Inc. (NYSE:KCG) has experienced zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here). Let’s take a look at Investment Technology Group (NYSE:ITG).

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Investment Technology Group (NYSE:ITG) 11 0 2

With the results exhibited by Insider Monkey’s strategies, everyday investors must always keep an eye on hedge fund and insider trading activity, and Knight Capital Group Inc. (NYSE:KCG) is an important part of this process.

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Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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