Is BHP Billiton Limited (ADR) (NYSE:BHP) a buy here? Investors who are in the know are taking a pessimistic view. The number of bullish hedge fund bets dropped by 6 lately.
According to most market participants, hedge funds are assumed to be slow, outdated financial vehicles of yesteryear. While there are more than 8000 funds trading at the moment, we at Insider Monkey look at the upper echelon of this club, close to 450 funds. It is widely believed that this group oversees most of the smart money's total capital, and by watching their top investments, we have identified a number of investment strategies that have historically outperformed 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 began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).
Equally as key, positive insider trading activity is a second way to parse down the investments you're interested in. As the old adage goes: there are many reasons for a bullish insider to sell shares of his or her company, but just one, very obvious reason why they would buy. Many empirical studies have demonstrated the useful potential of this strategy if shareholders understand what to do (learn more here).
Consequently, it's important to take a gander at the recent action surrounding BHP Billiton Limited (ADR) (NYSE:BHP).
Heading into 2013, a total of 14 of the hedge funds we track were long in this stock, a change of -30% 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 holdings meaningfully.
When looking at the hedgies we track, Ken Fisher's Fisher Asset Management had the biggest position in BHP Billiton Limited (ADR) (NYSE:BHP), worth close to $529.4 million, accounting for 1.5% of its total 13F portfolio. The second largest stake is held by Michael Hintze of CQS Cayman LP, with a $33 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include John Burbank's Passport Capital, and Bart Baum's Ionic Capital Management.
Because BHP Billiton Limited (ADR) (NYSE:BHP) has faced falling interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedgies that decided to sell off their full holdings heading into 2013. It's worth mentioning that Jim Simons's Renaissance Technologies dropped the largest position of all the hedgies we monitor, totaling close to $44.8 million in stock.. Israel Englander's fund, Millennium Management, also dropped its call options., about $8.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 6 funds heading into 2013.
Insider purchases made by high-level executives is particularly usable when the company we're looking at has experienced transactions within the past 180 days. Over the last 180-day time period, BHP Billiton Limited (ADR) (NYSE:BHP) has experienced zero unique insiders buying, 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 BHP Billiton Limited (ADR) (NYSE:BHP). These stocks are Cameco Corporation (USA) (NYSE:CCJ), Teck Resources Ltd (USA) (NYSE:TCK), Rio Tinto plc (ADR) (NYSE:RIO), Vale SA (ADR) (NYSE:VALE), and BHP Billiton plc (ADR) (NYSE:BBL). This group of stocks are in the industrial metals & minerals industry and their market caps resemble BHP's market cap.