Is Knight Capital Group Inc. (NYSE:KCG) a good investment?
In today’s marketplace, there are dozens of indicators shareholders can use to watch publicly traded companies. A duo of the most useful are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the broader indices by a healthy margin (see just how much).
Equally as necessary, positive insider trading activity is a second way to look at the stock market universe. As the old adage goes: there are a number of motivations for an executive to sell shares of his or her company, but only one, very obvious reason why they would buy. Plenty of academic studies have demonstrated the useful potential of this method if shareholders understand where to look (learn more here).
Thus, let's examine the recent info about Knight Capital Group Inc. (NYSE:KCG).
Heading into Q3, a total of 7 of the hedge funds we track held long positions in this stock, a change of -50% from one quarter earlier. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes significantly.
When using filings from the hedgies we track, D E Shaw, managed by D. E. Shaw, holds the largest position in Knight Capital Group Inc. (NYSE:KCG). D E Shaw has a $7.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On D E Shaw's heels is Paul Glazer of Glazer Capital, with a $4.9 million position; 2% of its 13F portfolio is allocated to the stock. Remaining hedge funds that hold long positions include Anil Stevens and Glenn Shapiro's Parameter Capital Management, Cliff Asness's AQR Capital Management and Ken Griffin's Citadel Investment Group.
As Knight Capital Group Inc. (NYSE:KCG) has experienced bearish sentiment from the smart money's best and brightest, it's safe to say that there lies a certain "tier" of money managers that slashed their entire stakes heading into Q2. Interestingly, Brian Taylor's Pine River Capital Management dropped the biggest stake of the "upper crust" of funds we track, totaling about $36.5 million in stock. Robert Emil Zoellner's fund, Alpine Associates, also dumped its stock, about $21.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 7 funds heading into Q2.
Legal insider trading, particularly when it's bullish, is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time period, Knight Capital Group Inc. (NYSE:KCG) has seen zero unique insiders purchasing, 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 Knight Capital Group Inc. (NYSE:KCG). These stocks are Greenhill & Co., Inc. (NYSE:GHL), Palmetto Bancshares Inc (NASDAQ:PLMT), SWS Group, Inc. (NYSE:SWS), Oppenheimer Holdings Inc. (USA) (NYSE:OPY), and Investment Technology Group (NYSE:ITG). This group of stocks are the members of the investment brokerage - regional industry and their market caps are closest to KCG's market cap.