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Norfolk Southern Corp. (NYSE:NSC): Are Hedge Funds Right About This Stock?

Norfolk Southern Corp. (NYSE:NSC) has experienced a decrease in hedge fund sentiment in recent months.

Earnings Analysis: Norfolk Southern Corp. (NYSE: NSC)In the eyes of most market participants, hedge funds are seen as slow, old financial tools of yesteryear. While there are more than 8000 funds in operation at the moment, we at Insider Monkey hone in on the moguls of this group, close to 450 funds. It is estimated that this group has its hands on the majority of the smart money’s total capital, and by keeping an eye on their best investments, we have deciphered a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Equally as integral, positive insider trading activity is a second way to break down the investments you’re interested in. There are a variety of reasons for an insider to cut shares of his or her company, but only one, very obvious reason why they would buy. Various empirical studies have demonstrated the valuable potential of this method if investors understand where to look (learn more here).

Now, we’re going to take a glance at the recent action surrounding Norfolk Southern Corp. (NYSE:NSC).

What have hedge funds been doing with Norfolk Southern Corp. (NYSE:NSC)?

Heading into 2013, a total of 31 of the hedge funds we track were long in this stock, a change of 0% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly.

Of the funds we track, Bill Miller’s Legg Mason Capital Management had the most valuable position in Norfolk Southern Corp. (NYSE:NSC), worth close to $74 million, accounting for 1.3% of its total 13F portfolio. Sitting at the No. 2 spot is Daniel Bubis of Tetrem Capital Management, with a $34 million position; the fund has 1% of its 13F portfolio invested in the stock. Other peers that are bullish include D. E. Shaw’s D E Shaw, Phill Gross and Robert Atchinson’s Adage Capital Management and Robert Sanborn and Rick Kilcollin’s Sanborn Kilcollin Partners LLC.

Due to the fact that Norfolk Southern Corp. (NYSE:NSC) has experienced a declination in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies that decided to sell off their full holdings last quarter. Interestingly, Jim Simons’s Renaissance Technologies dropped the biggest position of all the hedgies we watch, valued at about $13 million in stock., and James Dondero of Highland Capital Management was right behind this move, as the fund dropped about $4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What do corporate executives and insiders think about Norfolk Southern Corp. (NYSE:NSC)?

Bullish insider trading is best served when the company in question has experienced transactions within the past six months. Over the latest six-month time frame, Norfolk Southern Corp. (NYSE:NSC) has seen zero unique insiders buying, and 4 insider sales (see the details of insider trades here).

With the results demonstrated by Insider Monkey’s strategies, retail investors must always watch hedge fund and insider trading sentiment, and Norfolk Southern Corp. (NYSE:NSC) 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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