Is Corrections Corp Of America (NYSE:CXW) a buy?
In the eyes of many of your peers, hedge funds are assumed to be overrated, outdated financial tools of a forgotten age. Although there are more than 8,000 hedge funds with their doors open today, Insider Monkey focuses on the crème de la crème of this club, around 525 funds. It is assumed that this group controls the majority of the smart money's total assets, and by monitoring their highest performing equity investments, we've discovered a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a 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 beaten the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).
Just as useful, positive insider trading sentiment is another way to look at the marketplace. Obviously, there are lots of motivations for an executive to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the market-beating potential of this strategy if you know what to do (learn more here).
Keeping this in mind, it's important to study the latest info surrounding Corrections Corp Of America (NYSE:CXW).
Heading into Q3, a total of 19 of the hedge funds we track were bullish in this stock, a change of -27% from one quarter earlier. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings considerably.
According to our 13F database, Jim Simons's Renaissance Technologies had the biggest position in Corrections Corp Of America (NYSE:CXW), worth close to $37.6 million, comprising 0.1% of its total 13F portfolio. Coming in second is Highland Capital Management, managed by James Dondero, which held a $25.8 million position; 2% of its 13F portfolio is allocated to the stock. Other hedgies that are bullish include Ric Dillon's Diamond Hill Capital, Ken Griffin's Citadel Investment Group and Cliff Asness's AQR Capital Management.
Since Corrections Corp Of America (NYSE:CXW) has experienced dropping sentiment from upper-tier hedge fund managers, it's safe to say that there was a specific group of money managers who were dropping their positions entirely in Q1. Intriguingly, Neil Chriss's Hutchin Hill Capital dumped the biggest position of all the hedgies we monitor, comprising close to $19.1 million in stock, and Eric Mindich of Eton Park Capital was right behind this move, as the fund dropped about $10.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 7 funds in Q1.
Bullish insider trading is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the last half-year time frame, Corrections Corp Of America (NYSE:CXW) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
We'll also examine the relationship between both of these indicators in other stocks similar to Corrections Corp Of America (NYSE:CXW). These stocks are FTI Consulting, Inc. (NYSE:FCN), Booz Allen Hamilton Holding Corporation (NYSE:BAH), The Corporate Executive Board Company (NYSE:CEB), Towers Watson & Co (NYSE:TW), and Genpact Limited (NYSE:G). This group of stocks are in the management services industry and their market caps are closest to CXW's market cap.