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Peabody Energy Corporation (NYSE:BTU): Insiders Are Dumping, Should You?

Peabody Energy Corporation (NYSE:BTU) was in 32 hedge funds’ portfolio at the end of December. BTU shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. There were 32 hedge funds in our database with BTU holdings at the end of the previous quarter.

Peabody Energy Corporation (NYSE:BTU)In today’s marketplace, there are tons of gauges investors can use to watch stocks. A pair of the best are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the top investment managers can outperform the broader indices by a healthy amount (see just how much).

Just as integral, bullish insider trading activity is another way to parse down the investments you’re interested in. As the old adage goes: there are a number of stimuli for an upper level exec to sell shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this strategy if shareholders understand where to look (learn more here).

With these “truths” under our belt, let’s take a look at the recent action regarding Peabody Energy Corporation (NYSE:BTU).

What does the smart money think about Peabody Energy Corporation (NYSE:BTU)?

Heading into 2013, a total of 32 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully.

Of the funds we track, Dmitry Balyasny’s Balyasny Asset Management had the biggest position in Peabody Energy Corporation (NYSE:BTU), worth close to $66 million billion, comprising 1.8% of its total 13F portfolio. The second largest stake is held by Bruce J. Richards and Louis Hanover of Marathon Asset Management, with a $44 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Phill Gross and Robert Atchinson’s Adage Capital Management, and Ken Griffin’s Citadel Investment Group.

Due to the fact that Peabody Energy Corporation (NYSE:BTU) has faced a declination in interest from hedge fund managers, it’s easy to see that there was a specific group of fund managers that decided to sell off their entire stakes heading into 2013. Interestingly, Jeffrey Vinik’s Vinik Asset Management cut the largest investment of the 450+ funds we monitor, valued at close to $51 million in stock.. Jim Simons’s fund, Renaissance Technologies, also sold off its stock, about $45 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading Peabody Energy Corporation (NYSE:BTU)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company in focus has experienced transactions within the past half-year. Over the last six-month time period, Peabody Energy Corporation (NYSE:BTU) has experienced zero unique insiders buying, and 3 insider sales (see the details of insider trades here).

With the results shown by our studies, retail investors should always keep an eye on hedge fund and insider trading activity, and Peabody Energy Corporation (NYSE:BTU) applies perfectly to this mantra.

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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