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This Data Says ADT Corp (ADT) Is Still a ‘SELL’

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ADT Corp (NYSE:ADT) has been a poor investment over the past few months. We’re not afraid to say it. Will things turn around over a sustained period? This data says ‘No.’

In the eyes of many investors, hedge funds are seen as bloated, outdated financial vehicles of a period lost to current times. Although there are over 8,000 hedge funds in operation currently, Insider Monkey focuses on the upper echelon of this group, around 525 funds. It is widely held that this group has its hands on the majority of all hedge funds’ total capital, and by tracking their best equity investments, we’ve found a number of investment strategies that have historically outpaced Mr. Market. 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 trumped the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as crucial, bullish insider trading activity is a second way to analyze the investments you’re interested in. Obviously, there are lots of stimuli for a corporate insider to cut shares of his or her company, but only one, very obvious reason why they would buy. Various empirical studies have demonstrated the valuable potential of this tactic if shareholders know where to look (learn more here).

Now that that’s out of the way, it’s important to discuss the latest info for ADT Corp (NYSE:ADT).

Hedge fund activity in ADT Corp (NYSE:ADT)

Heading into Q3, a total of 50 of the hedge funds we track were long in this stock, a change of -11% from the first quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably.

ADT Corp (NYSE:ADT)According to our 13F database, Corvex Capital, managed by Keith Meister, holds the biggest position in ADT Corp (NYSE:ADT). Corvex Capital has a $445 million position in the stock, comprising 8.4% of its 13F portfolio. Coming in second is David Cohen and Harold Levy of Iridian Asset Management, with a $95 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Peter Rathjens Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw.

Since ADT Corp (NYSE:ADT) has faced a fall in interest from the entirety of the hedge funds we track, we can see that there is a sect of money managers who sold off their entire stakes last quarter. At the top of the heap, Sean Cullinan’s Point State Capital dropped the biggest position of all the hedgies we track, valued at close to $192.5 million in stock. Robert Pohly’s fund, Samlyn Capital, also dumped its stock, about $50.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 6 funds last quarter.

Insider trading activity in ADT Corp (NYSE:ADT)

Bullish insider trading is particularly usable when the company in question has seen transactions within the past six months. Over the last half-year time frame, ADT Corp (NYSE:ADT) has seen 1 unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to ADT Corp (NYSE:ADT). These stocks are Checkpoint Systems, Inc. (NYSE:CKP), Ascent Capital Group Inc (NASDAQ:ASCMA), Brink’S Co (NYSE:BCO), The Geo Group, Inc. (NYSE:GEO), and Tyco International Ltd. (NYSE:TYC). This group of stocks are in the security & protection services industry and their market caps resemble ADT’s market cap.

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