According to most market participants, hedge funds are seen as worthless, old investment tools of the past. While there are over 8000 funds trading at the moment, we at Insider Monkey choose to focus on the bigwigs of this club, around 450 funds. It is widely believed that this group controls most of the smart money’s total asset base, and by tracking their top stock picks, we have unearthed a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outpaced 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 23.3 percentage points in 8 months (see all of our picks from August).
Equally as important, bullish insider trading sentiment is another way to parse down the financial markets. As the old adage goes: there are a number of reasons for a corporate insider to sell shares of his or her company, but just one, very simple reason why they would buy. Various academic studies have demonstrated the market-beating potential of this method if shareholders understand what to do (learn more here).
Keeping this in mind, let’s take a glance at the recent action surrounding Sterling Financial Corporation (NASDAQ:STSA).
What does the smart money think about Sterling Financial Corporation (NASDAQ:STSA)?
In preparation for this quarter, a total of 10 of the hedge funds we track were bullish in this stock, a change of 25% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably.
Of the funds we track, Brian J. Higgins’s King Street Capital had the most valuable position in Sterling Financial Corporation (NASDAQ:STSA), worth close to $21.7 million, comprising 4.2% of its total 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which held a $7.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include Jim Simons’s Renaissance Technologies, Bruce Kovner’s Caxton Associates LP and Ken Griffin’s Citadel Investment Group.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Sterling Financial Corporation (NASDAQ:STSA) headfirst. Millennium Management, managed by Israel Englander, initiated the biggest position in Sterling Financial Corporation (NASDAQ:STSA). Millennium Management had 0.9 million invested in the company at the end of the quarter. Steven Cohen’s SAC Capital Advisors also initiated a $0.6 million position during the quarter. The only other fund with a brand new STSA position is Matthew Hulsizer’s PEAK6 Capital Management.
What do corporate executives and insiders think about Sterling Financial Corporation (NASDAQ:STSA)?
Insider trading activity, especially when it’s bullish, is best served when the company in question has seen transactions within the past six months. Over the last six-month time period, Sterling Financial Corporation (NASDAQ:STSA) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Sterling Financial Corporation (NASDAQ:STSA). These stocks are Provident Financial Services, Inc. (NYSE:PFS), Astoria Financial Corp (NYSE:AF), Washington Federal Inc. (NASDAQ:WAFD), Capitol Federal Financial, Inc. (NASDAQ:CFFN), and Northwest Bancshares, Inc. (NASDAQ:NWBI). This group of stocks are in the savings & loans industry and their market caps are similar to STSA’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Provident Financial Services, Inc. (NYSE:PFS) | 8 | 3 | 2 |
| Astoria Financial Corp (NYSE:AF) | 11 | 0 | 4 |
| Washington Federal Inc. (NASDAQ:WAFD) | 18 | 2 | 1 |
| Capitol Federal Financial, Inc. (NASDAQ:CFFN) | 20 | 2 | 0 |
| Northwest Bancshares, Inc. (NASDAQ:NWBI) | 13 | 1 | 2 |
With the results demonstrated by Insider Monkey’s strategies, everyday investors must always keep an eye on hedge fund and insider trading activity, and Sterling Financial Corporation (NASDAQ:STSA) is an important part of this process.
