Should You Avoid Mercadolibre Inc (MELI)?: E Commerce China Dangdang Inc (ADR) (DANG), Stamps.com Inc. (STMP)

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Is Mercadolibre Inc (NASDAQ:MELI) an attractive stock to buy now? Investors who are in the know are reducing their bets on the stock. The number of long hedge fund positions fell by 4 lately.

According to most stock holders, hedge funds are seen as underperforming, outdated investment tools of the past. While there are greater than 8000 funds trading today, we choose to focus on the aristocrats of this club, about 450 funds. It is widely believed that this group oversees the lion’s share of all hedge funds’ total capital, and by paying attention to their highest performing picks, we have uncovered a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outpaced 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 topped the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Equally as key, positive insider trading sentiment is a second way to break down the financial markets. There are a variety of incentives for a corporate insider to sell shares of his or her company, but only one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the useful potential of this tactic if you understand where to look (learn more here).

With all of this in mind, it’s important to take a glance at the latest action surrounding Mercadolibre Inc (NASDAQ:MELI).

How are hedge funds trading Mercadolibre Inc (NASDAQ:MELI)?

In preparation for this year, a total of 9 of the hedge funds we track were long in this stock, a change of -31% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially.

According to our comprehensive database, Ken Griffin’s Citadel Investment Group had the largest position in Mercadolibre Inc (NASDAQ:MELI), worth close to $15 million, comprising 0% of its total 13F portfolio. Sitting at the No. 2 spot is Driehaus Capital, managed by Richard Driehaus, which held a $7 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedge funds that are bullish include David Blood and Al Gore’s Generation Investment Management, and John Burbank’s Passport Capital.

Due to the fact that Mercadolibre Inc (NASDAQ:MELI) has faced falling interest from the smart money, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their entire stakes last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies dumped the biggest position of all the hedgies we watch, comprising close to $25 million in stock., and Christopher Lord of Criterion Capital was right behind this move, as the fund dropped about $9 million worth. These transactions are interesting, as total hedge fund interest was cut by 4 funds last quarter.

What do corporate executives and insiders think about Mercadolibre Inc (NASDAQ:MELI)?

Insider purchases made by high-level executives is most useful when the company in focus has experienced transactions within the past half-year. Over the latest six-month time period, Mercadolibre Inc (NASDAQ:MELI) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Mercadolibre Inc (NASDAQ:MELI). These stocks are E Commerce China Dangdang Inc (ADR) (NYSE:DANG), Stamps.com Inc. (NASDAQ:STMP), PC Connection, Inc. (NASDAQ:PCCC), Liquidity Services, Inc. (NASDAQ:LQDT), and Liberty Interactive (Interactive group) (NASDAQ:LINTA). This group of stocks are in the catalog & mail order houses industry and their market caps resemble MELI’s market cap.

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