Plains Exploration & Production Company (NYSE:PXP) investors should pay attention to an increase in hedge fund sentiment lately.
In the eyes of most stock holders, hedge funds are viewed as unimportant, old investment tools of years past. While there are more than 8000 funds with their doors open at the moment, we choose to focus on the moguls of this group, close to 450 funds. Most estimates calculate that this group controls the majority of all hedge funds' total capital, and by watching their highest performing stock picks, we have unsheathed a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).
Equally as key, positive insider trading activity is a second way to break down the investments you're interested in. As the old adage goes: there are a number of incentives for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this strategy if "monkeys" understand what to do (learn more here).
With all of this in mind, we're going to take a peek at the recent action surrounding Plains Exploration & Production Company (NYSE:PXP).
At year's end, a total of 37 of the hedge funds we track were long in this stock, a change of 19% from the previous quarter. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably.
According to our comprehensive database, John Paulson's Paulson & Co had the largest position in Plains Exploration & Production Company (NYSE:PXP), worth close to $601 million, accounting for 3.7% of its total 13F portfolio. Sitting at the No. 2 spot is Robert Emil Zoellner of Alpine Associates, with a $178 million position; 3.7% of its 13F portfolio is allocated to the stock. Other hedgies with similar optimism include Sean Cullinan's Point State Capital, and D. E. Shaw's D E Shaw.
As one would reasonably expect, key money managers were breaking ground themselves. Paulson & Co, managed by John Paulson, established the most outsized position in Plains Exploration & Production Company (NYSE:PXP). Paulson & Co had 601 million invested in the company at the end of the quarter. Robert Emil Zoellner's Alpine Associates also made a $178 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Halbower's Pentwater Capital Management, James Dinan's York Capital Management, and George Soros's Soros Fund Management.
Insider buying is particularly usable when the company in focus has experienced transactions within the past six months. Over the last 180-day time period, Plains Exploration & Production Company (NYSE:PXP) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
With the returns exhibited by our strategies, retail investors must always watch hedge fund and insider trading activity, and Plains Exploration & Production Company (NYSE:PXP) is no exception.
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.