Should You Avoid Xylem Inc (NYSE:XYL)?

Is Xylem Inc (NYSE:XYL) a safe investment now? Prominent investors are turning less bullish. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience

According to most stock holders, hedge funds are perceived as slow, old financial vehicles of years past. While there are more than 8000 funds trading today, we look at the crème de la crème of this group, close to 450 funds. It is widely believed that this group oversees the lion’s share of the hedge fund industry’s total asset base, and by paying attention to their top picks, we have identified a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outstripped 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Xylem IncEqually as key, positive insider trading sentiment is a second way to break down the stock market universe. Just as you’d expect, there are lots of reasons for a corporate insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Plenty of academic studies have demonstrated the market-beating potential of this tactic if shareholders understand where to look (learn more here).

Now, let’s take a glance at the recent action encompassing Xylem Inc (NYSE:XYL).

What have hedge funds been doing with Xylem Inc (NYSE:XYL)?

At the end of the fourth quarter, a total of 16 of the hedge funds we track held long positions in this stock, a change of 0% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes significantly.

According to our comprehensive database, Jeffrey Gates’s Gates Capital Management had the largest position in Xylem Inc (NYSE:XYL), worth close to $115 million, comprising 7.2% of its total 13F portfolio. Sitting at the No. 2 spot is Mario Gabelli of GAMCO Investors, with a $83 million position; 0% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Phill Gross and Robert Atchinson’s Adage Capital Management, D. E. Shaw’s D E Shaw and Steven Cohen’s SAC Capital Advisors.

Because Xylem Inc (NYSE:XYL) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies who sold off their entire stakes heading into 2013. Interestingly, David Harding’s Winton Capital Management dumped the largest stake of all the hedgies we track, comprising about $4 million in stock., and John Overdeck and David Siegel of Two Sigma Advisors was right behind this move, as the fund dropped about $1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Insider trading activity in Xylem Inc (NYSE:XYL)

Insider trading activity, especially when it’s bullish, is best served when the company in question has experienced transactions within the past six months. Over the last half-year time frame, Xylem Inc (NYSE:XYL) has experienced zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

With the returns exhibited by Insider Monkey’s strategies, retail investors must always pay attention to hedge fund and insider trading activity, and Xylem Inc (NYSE:XYL) 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.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!