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Should You Avoid the SPDR Gold Trust (ETF) (NYSEARCA:GLD)?

Is SPDR Gold Trust (ETF) (NYSEARCA:GLD) a bargain? The best stock pickers are reducing their bets on the stock. The number of bullish hedge fund bets shrunk by 9 recently.

To the average investor, there are plenty of metrics investors can use to analyze Mr. Market. A couple of the most innovative are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the best money managers can outperform their index-focused peers by a significant margin (see just how much).

Just as key, optimistic insider trading sentiment is a second way to parse down the investments you’re interested in. Just as you’d expect, there are a variety of motivations for an upper level exec to sell shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the impressive potential of this strategy if you know where to look (learn more here).

Keeping this in mind, let’s take a peek at the recent action regarding SPDR Gold Trust (ETF) (NYSEARCA:GLD).

How are hedge funds trading SPDR Gold Trust (ETF) (NYSEARCA:GLD)?

At year’s end, a total of 67 of the hedge funds we track were long in this stock, a change of -12% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially.

Of the funds we track, Mason Capital Management, managed by Kenneth Mario Garschina, holds the largest position in SPDR Gold Trust (ETF) (NYSEARCA:GLD). Mason Capital Management has a $4.261 billion call position in the stock, comprising 61.2% of its 13F portfolio. Coming in second is Paulson & Co, managed by John Paulson, which held a $3.538 billion position; the fund has 21.7% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Peter Franklin Palmedo’s Sun Valley Gold, Jean-Marie Eveillard’s First Eagle Investment Management and Peter Adam Hochfelder’s Brahman Capital.

Because SPDR Gold Trust (ETF) (NYSEARCA:GLD) has faced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who sold off their entire stakes heading into 2013. Interestingly, Sean Cullinan’s Point State Capital sold off the biggest position of all the hedgies we track, totaling about $913 million in call options, and Stephen Mandel of Lone Pine Capital was right behind this move, as the fund said goodbye to about $445 million worth. These transactions are important to note, as total hedge fund interest fell by 9 funds heading into 2013.

Insider trading activity in SPDR Gold Trust (ETF) (NYSEARCA:GLD)

Bullish insider trading is best served when the company in focus has experienced transactions within the past 180 days. Over the last half-year time frame, SPDR Gold Trust (ETF) (NYSEARCA:GLD) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the results demonstrated by our research, everyday investors must always monitor hedge fund and insider trading activity, and SPDR Gold Trust (ETF) (NYSEARCA:GLD) shareholders fit into this picture quite nicely.

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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