The Bank of Nova Scotia (USA) (NYSE:BNS) investors should be aware of a decrease in enthusiasm from smart money in recent months.
If you’d ask most shareholders, hedge funds are viewed as unimportant, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at present, we choose to focus on the bigwigs of this club, close to 450 funds. It is widely believed that this group oversees the lion’s share of all hedge funds’ total asset base, and by paying attention to their top investments, we have found a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).
Equally as important, optimistic insider trading activity is a second way to parse down the stock market universe. Just as you’d expect, there are plenty of stimuli for an insider to drop shares of his or her company, but only one, very clear reason why they would behave bullishly. Several academic studies have demonstrated the useful potential of this tactic if you understand where to look (learn more here).
Consequently, it’s important to take a peek at the key action surrounding The Bank of Nova Scotia (USA) (NYSE:BNS).
How have hedgies been trading The Bank of Nova Scotia (USA) (NYSE:BNS)?
Heading into 2013, a total of 12 of the hedge funds we track held long positions in this stock, a change of -8% from the third quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes significantly.
When looking at the hedgies we track, Daniel Bubis’s Tetrem Capital Management had the biggest position in The Bank of Nova Scotia (USA) (NYSE:BNS), worth close to $118 million, comprising 3.5% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which held a $52 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include D. E. Shaw’s D E Shaw, Malcolm Fairbairn’s Ascend Capital and J. Alan Reid, Jr.’s Forward Management.
Since The Bank of Nova Scotia (USA) (NYSE:BNS) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers that slashed their full holdings in Q4. Interestingly, Jim Simons’s Renaissance Technologies dropped the biggest position of all the hedgies we monitor, comprising close to $6 million in stock.. John Thiessen’s fund, Vertex One Asset Management, also said goodbye to its stock, about $0 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds in Q4.
How have insiders been trading The Bank of Nova Scotia (USA) (NYSE:BNS)?
Insider buying is best served when the company we’re looking at has experienced transactions within the past six months. Over the latest six-month time frame, The Bank of Nova Scotia (USA) (NYSE:BNS) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to The Bank of Nova Scotia (USA) (NYSE:BNS). These stocks are Toronto-Dominion Bank (USA) (NYSE:TD), Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU), Bank of Montreal (USA) (NYSE:BMO), Bank of America Corp (NYSE:BAC), and Citigroup Inc. (NYSE:C). This group of stocks belong to the money center banks industry and their market caps are similar to BNS’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Toronto-Dominion Bank (USA) (NYSE:TD)||10||0||0|
|Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU)||12||0||0|
|Bank of Montreal (USA) (NYSE:BMO)||10||0||0|
|Bank of America Corp (NYSE:BAC)||93||1||0|
|Citigroup Inc. (NYSE:C)||108||2||1|
With the results shown by our strategies, retail investors must always keep an eye on hedge fund and insider trading activity, and The Bank of Nova Scotia (USA) (NYSE:BNS) is no exception.
Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.