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Rio Tinto plc (ADR) (RIO): Are Hedge Funds Right About This Stock?

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Rio Tinto plc (ADR) (NYSE:RIO) was in 9 hedge funds’ portfolio at the end of December. RIO has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 16 hedge funds in our database with RIO positions at the end of the previous quarter.

According to most traders, hedge funds are viewed as worthless, old investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, we at Insider Monkey choose to focus on the top tier of this club, about 450 funds. It is widely believed that this group has its hands on most of the smart money’s total capital, and by monitoring their top equity investments, we have formulated a number of investment strategies that have historically outperformed the S&P 500 index. 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 outperformed 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 activity is a second way to parse down the investments you’re interested in. There are a variety of motivations for a corporate insider to get rid of shares of his or her company, but only one, very clear reason why they would behave bullishly. Various academic studies have demonstrated the impressive potential of this method if you understand where to look (learn more here).

With all of this in mind, it’s important to take a peek at the latest action surrounding Rio Tinto plc (ADR) (NYSE:RIO).

What have hedge funds been doing with Rio Tinto plc (ADR) (NYSE:RIO)?

At the end of the fourth quarter, a total of 9 of the hedge funds we track were bullish in this stock, a change of -44% from the third quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully.

Of the funds we track, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Rio Tinto plc (ADR) (NYSE:RIO). Fisher Asset Management has a $451.3 million position in the stock, comprising 1.3% of its 13F portfolio. Coming in second is Russell Hawkins of Hawkins Capital, with a $17.8 million position; the fund has 2% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Steven Cohen’s SAC Capital Advisors, Jim Simons’s Renaissance Technologies and Richard Driehaus’s Driehaus Capital.

A Deeper Look at South Africa’s Commodity IndustryDue to the fact that Rio Tinto plc (ADR) (NYSE:RIO) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers who sold off their positions entirely at the end of the year. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management dumped the largest stake of the 450+ funds we track, totaling about $14 million in stock.. Howard Marks’s fund, Oaktree Capital Management, also said goodbye to its stock, about $5 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 7 funds at the end of the year.

How are insiders trading Rio Tinto plc (ADR) (NYSE:RIO)?

Insider purchases made by high-level executives is best served when the primary stock in question has experienced transactions within the past 180 days. Over the latest 180-day time period, Rio Tinto plc (ADR) (NYSE:RIO) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Rio Tinto plc (ADR) (NYSE:RIO). These stocks are Cameco Corporation (USA) (NYSE:CCJ), Teck Resources Ltd (USA) (NYSE:TCK), BHP Billiton Limited (ADR) (NYSE:BHP), BHP Billiton plc (ADR) (NYSE:BBL), and Vale SA (ADR) (NYSE:VALE). This group of stocks are the members of the industrial metals & minerals industry and their market caps are similar to RIO’s market cap.

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