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Is AOL, Inc. (NYSE:AOL) Going to Burn These Hedge Funds?

AOL, Inc. (NYSE:AOL) was in 19 hedge funds’ portfolio at the end of December. AOL has experienced an increase in support from the world’s most elite money managers in recent months. There were 17 hedge funds in our database with AOL holdings at the end of the previous quarter.

AOL, Inc. (NYSE:AOL)

In the eyes of most market participants, hedge funds are assumed to be underperforming, outdated investment tools of years past. While there are more than 8000 funds in operation at the moment, we at Insider Monkey look at the masters of this group, about 450 funds. It is estimated that this group controls the majority of all hedge funds’ total capital, and by paying attention to their best equity investments, we have unearthed a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outperformed 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 outclassed the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Equally as important, positive insider trading activity is a second way to break down the investments you’re interested in. As the old adage goes: there are a variety of incentives for an executive to drop shares of his or her company, but just one, very obvious reason why they would behave bullishly. Plenty of empirical studies have demonstrated the impressive potential of this strategy if shareholders know what to do (learn more here).

Now, we’re going to take a glance at the latest action regarding AOL, Inc. (NYSE:AOL).

How have hedgies been trading AOL, Inc. (NYSE:AOL)?

At year’s end, a total of 19 of the hedge funds we track were long in this stock, a change of 12% from the third quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully.

Of the funds we track, D E Shaw, managed by D. E. Shaw, holds the biggest position in AOL, Inc. (NYSE:AOL). D E Shaw has a $93 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Iridian Asset Management, managed by David Cohen and Harold Levy, which held a $85 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’s Renaissance Technologies and Jean-Marie Eveillard’s First Eagle Investment Management.

As one would reasonably expect, key money managers were leading the bulls’ herd. Highbridge Capital Management, managed by Glenn Russell Dubin, established the most valuable position in AOL, Inc. (NYSE:AOL). Highbridge Capital Management had 10 million invested in the company at the end of the quarter. Steven Cohen’s SAC Capital Advisors also made a $9 million investment in the stock during the quarter. The other funds with new positions in the stock are Jeffrey Vinik’s Vinik Asset Management, Mike Vranos’s Ellington, and David Costen Haley’s HBK Investments.

Insider trading activity in AOL, Inc. (NYSE:AOL)

Insider purchases made by high-level executives is at its handiest when the primary stock in question has seen transactions within the past 180 days. Over the last six-month time frame, AOL, Inc. (NYSE:AOL) has experienced zero unique insiders buying, and 4 insider sales (see the details of insider trades here).

With the results demonstrated by the aforementioned studies, retail investors must always watch hedge fund and insider trading sentiment, and AOL, Inc. (NYSE:AOL) shareholders fit into this picture quite nicely.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

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.

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