NorthWestern Corp (NWE): Are Hedge Funds Right About This Stock?

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NorthWestern Corp (NYSE:NWE) has experienced an increase in support from the world’s most elite money managers lately.

NorthWestern Corp (NYSE:NWE)

In the eyes of most investors, hedge funds are seen as worthless, old financial vehicles of the past. While there are more than 8000 funds trading today, we at Insider Monkey choose to focus on the moguls of this club, close to 450 funds. It is estimated that this group controls the majority of the hedge fund industry’s total capital, and by keeping an eye on their best stock picks, we have identified a few investment strategies that have historically outstripped the S&P 500 index. 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 started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Equally as beneficial, optimistic insider trading sentiment is a second way to parse down the financial markets. As the old adage goes: there are plenty of incentives for an upper level exec to sell shares of his or her company, but only one, very simple reason why they would buy. Many academic studies have demonstrated the impressive potential of this strategy if you understand what to do (learn more here).

Consequently, we’re going to take a look at the key action encompassing NorthWestern Corp (NYSE:NWE).

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

In preparation for this year, a total of 9 of the hedge funds we track were bullish in this stock, a change of 13% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully.

Of the funds we track, Phill Gross and Robert Atchinson’s Adage Capital Management had the biggest position in NorthWestern Corp (NYSE:NWE), worth close to $34.7 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $19.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds that hold long positions include Mario Gabelli’s GAMCO Investors, Cliff Asness’s AQR Capital Management and D. E. Shaw’s D E Shaw.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Levin Capital Strategies, managed by John A. Levin, initiated the biggest position in NorthWestern Corp (NYSE:NWE). Levin Capital Strategies had 1.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.3 million position during the quarter.

How are insiders trading NorthWestern Corp (NYSE:NWE)?

Insider buying is best served when the company in question has experienced transactions within the past half-year. Over the latest 180-day time period, NorthWestern Corp (NYSE:NWE) has experienced 1 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity 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 resemble NWE’s market cap.

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