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Netflix, Inc. (NASDAQ:NFLX): Insiders Are Dumping, Should You?

Netflix, Inc. (NASDAQ:NFLX) was in 30 hedge funds’ portfolio at the end of the fourth quarter of 2012. NFLX has seen an increase in hedge fund interest recently. There were 23 hedge funds in our database with NFLX positions at the end of the previous quarter.

At the moment, there are plenty of methods market participants can use to watch Mr. Market. Some of the most under-the-radar are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the market by a healthy margin (see just how much).

Netflix, Inc. (NASDAQ:NFLX)Just as beneficial, positive insider trading sentiment is a second way to break down the world of equities. There are lots of motivations for an insider to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various academic studies have demonstrated the market-beating potential of this method if shareholders understand what to do (learn more here).

Now, let’s take a look at the latest action surrounding Netflix, Inc. (NASDAQ:NFLX).

Hedge fund activity in Netflix, Inc. (NASDAQ:NFLX)

In preparation for this year, a total of 30 of the hedge funds we track were bullish in this stock, a change of 30% from the third quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly.

When looking at the hedgies we track, Carl Icahn’s Icahn Capital LP had the largest position in Netflix, Inc. (NASDAQ:NFLX), worth close to $514 million, accounting for 4% of its total 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $180 million call position; 1.9% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism include Philippe Laffont’s Coatue Management, Barry Rosenstein’s JANA Partners and Ken Griffin’s Citadel Investment Group.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Coatue Management, managed by Philippe Laffont, assembled the biggest position in Netflix, Inc. (NASDAQ:NFLX). Coatue Management had 118 million invested in the company at the end of the quarter. Christopher Lord’s Criterion Capital also made a $40 million investment in the stock during the quarter. The following funds were also among the new NFLX investors: Brian Kelly’s Asian Century Quest, Christopher MedlockáJames’s Partner Fund Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.

How have insiders been trading Netflix, Inc. (NASDAQ:NFLX)?

Insider purchases made by high-level executives is most useful when the company in focus has seen transactions within the past six months. Over the latest six-month time frame, Netflix, Inc. (NASDAQ:NFLX) has experienced zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

With the results shown by the aforementioned tactics, everyday investors should always monitor hedge fund and insider trading sentiment, and Netflix, Inc. (NASDAQ:NFLX) is no exception.

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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