This Metric Says You Are Smart to Buy Koninklijke Philips Electronics NV (ADR) (PHG)

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Koninklijke Philips Electronics NV (ADR) (NYSE:PHG) has experienced an increase in hedge fund sentiment lately.

If you’d ask most shareholders, hedge funds are viewed as slow, outdated financial vehicles of the past. While there are more than 8000 funds with their doors open at present, we at Insider Monkey choose to focus on the masters of this club, about 450 funds. Most estimates calculate that this group oversees the majority of all hedge funds’ total capital, and by watching their top picks, we have uncovered a few investment strategies that have historically outstripped 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Koninklijke Philips Electronics NV (ADR) (PHG)

Just as integral, bullish insider trading sentiment is another way to parse down the world of equities. As the old adage goes: there are a number of reasons for an insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this tactic if you understand what to do (learn more here).

With these “truths” under our belt, we’re going to take a gander at the latest action regarding Koninklijke Philips Electronics NV (ADR) (NYSE:PHG).

What does the smart money think about Koninklijke Philips Electronics NV (ADR) (NYSE:PHG)?

At Q1′s end, a total of 11 of the hedge funds we track were long in this stock, a change of 10% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably.

When looking at the hedgies we track, Mason Hawkins’s Southeastern Asset Management had the biggest position in Koninklijke Philips Electronics NV (ADR) (NYSE:PHG), worth close to $569.1 million, accounting for 2.6% of its total 13F portfolio. On Southeastern Asset Management’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which held a $27.7 million position; 0.2% of its 13F portfolio is allocated to the company. Other peers that hold long positions include Jim Simons’s Renaissance Technologies, Andrew Sandler’s Sandler Capital Management and Jeffrey Vinik’s Vinik Asset Management.

As aggregate interest increased, key hedge funds have jumped into Koninklijke Philips Electronics NV (ADR) (NYSE:PHG) headfirst. Renaissance Technologies, managed by Jim Simons, assembled the most outsized position in Koninklijke Philips Electronics NV (ADR) (NYSE:PHG). Renaissance Technologies had 10.9 million invested in the company at the end of the quarter. Andrew Sandler’s Sandler Capital Management also made a $9.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Jeffrey Vinik’s Vinik Asset Management and Matthew Hulsizer’s PEAK6 Capital Management.

Insider trading activity in Koninklijke Philips Electronics NV (ADR) (NYSE:PHG)

Bullish insider trading is at its handiest when the company we’re looking at has seen transactions within the past half-year. Over the latest six-month time period, Koninklijke Philips Electronics NV (ADR) (NYSE:PHG) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Koninklijke Philips Electronics NV (ADR) (NYSE:PHG). These stocks are Ingersoll-Rand PLC (NYSE:IR), Kubota Corp (ADR) (NYSE:KUB), Danaher Corporation (NYSE:DHR), Cummins Inc. (NYSE:CMI), and Illinois Tool Works Inc. (NYSE:ITW). This group of stocks belong to the diversified machinery industry and their market caps resemble PHG’s market cap.

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