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Is NorthWestern Corp (NWE) Going to Burn These Hedge Funds?

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If you were to ask many of your peers, hedge funds are viewed as overrated, outdated investment vehicles of a period lost to current times. Although there are over 8,000 hedge funds in operation currently, Insider Monkey aim at the bigwigs of this club, close to 525 funds. Analysts calculate that this group controls most of all hedge funds’ total capital, and by paying attention to their best picks, we’ve unsheathed a number of investment strategies that have historically outstripped Mr. 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 started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

NorthWestern Corp (NYSE:NWE)

Equally as key, optimistic insider trading activity is another way to look at the world of equities. As the old adage goes: there are lots of incentives for a bullish insider to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Many academic studies have demonstrated the useful potential of this strategy if piggybackers know what to do (learn more here).

Thus, we’re going to study the recent info for NorthWestern Corp (NYSE:NWE).

How have hedgies been trading NorthWestern Corp (NYSE:NWE)?

At Q2’s end, a total of 17 of the hedge funds we track were bullish in this stock, a change of 55% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully.

Out of the hedge funds we follow, Phill Gross and Robert Atchinson’s Adage Capital Management had the most valuable position in NorthWestern Corp (NYSE:NWE), worth close to $39.9 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which held a $33.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include Mario Gabelli’s GAMCO Investors, Cliff Asness’s AQR Capital Management and D. E. Shaw’s D E Shaw.

Now, certain bigger names were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most outsized position in NorthWestern Corp (NYSE:NWE). Adage Capital Management had 39.9 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $33.2 million investment in the stock during the quarter. The other funds with brand new NWE positions are Mario Gabelli’s GAMCO Investors, Cliff Asness’s AQR Capital Management, and D. E. Shaw’s D E Shaw.

Insider trading activity in NorthWestern Corp (NYSE:NWE)

Insider buying made by high-level executives is particularly usable when the company we’re looking at has seen transactions within the past half-year. Over the last half-year time period, NorthWestern Corp (NYSE:NWE) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to NorthWestern Corp (NYSE:NWE). These stocks are Otter Tail Corporation (NASDAQ:OTTR), ALLETE Inc (NYSE:ALE), PNM Resources, Inc. (NYSE:PNM), MGE Energy, Inc. (NASDAQ:MGEE), and Avista Corp (NYSE:AVA). This group of stocks are the members of the diversified utilities industry and their market caps are closest to NWE’s market cap.

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