This Metric Says You Are Smart to Buy

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Renren Inc (NYSE:RENN) was in 5 hedge funds’ portfolio at the end of the fourth quarter of 2012. RENN shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. There were 4 hedge funds in our database with RENN positions at the end of the previous quarter.

If you’d ask most stock holders, hedge funds are assumed to be slow, old investment vehicles of years past. While there are greater than 8000 funds with their doors open today, we at Insider Monkey choose to focus on the leaders of this club, about 450 funds. Most estimates calculate that this group oversees the lion’s share of the hedge fund industry’s total asset base, and by keeping an eye on their best equity investments, we have deciphered a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outperformed 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 24 percentage points in 7 months (explore the details and some picks here).

Equally as key, positive insider trading sentiment is a second way to parse down the world of equities. Just as you’d expect, there are lots of incentives for an executive to downsize shares of his or her company, but only one, very simple reason why they would initiate a purchase. Various academic studies have demonstrated the impressive potential of this strategy if investors know where to look (learn more here).

Now, we’re going to take a gander at the recent action surrounding Renren Inc (NYSE:RENN).

Hedge fund activity in

At year’s end, a total of 5 of the hedge funds we track were bullish in this stock, a change of 25% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, created the largest position in . Renaissance Technologies had 3.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new RENN investors: David Costen Haley’s HBK Investments and John Overdeck and David Siegel’s Two Sigma Advisors.

How are insiders trading ?

Let’s also review hedge fund and insider activity in other stocks similar to Renren Inc (NYSE:RENN). These stocks are Global Sources Ltd. (Bermuda) (NASDAQ:GSOL), SouFun Holdings Limited (ADR) (NYSE:SFUN), Move Inc. (NASDAQ:MOVE), Travelzoo Inc. (NASDAQ:TZOO), and Bitauto Hldg Ltd (ADR) (NYSE:BITA). This group of stocks are in the internet information providers industry and their market caps are closest to RENN’s market cap.

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