Is CNH Global NV (ADR) (NYSE:CNH) a healthy stock for your portfolio? Investors who are in the know are becoming less confident. The number of long hedge fund bets stayed the same which is a slightly negative development in our experience.
If you'd ask most stock holders, hedge funds are assumed to be unimportant, outdated investment vehicles of the past. While there are more than 8000 funds in operation at present, we choose to focus on the top tier of this group, about 450 funds. It is widely believed that this group oversees most of all hedge funds' total capital, and by keeping an eye on their best stock picks, we have identified a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Equally as beneficial, positive insider trading activity is another way to break down the investments you're interested in. Obviously, there are plenty of incentives for a corporate insider to sell shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the impressive potential of this tactic if shareholders know what to do (learn more here).
Consequently, let's take a look at the latest action encompassing CNH Global NV (ADR) (NYSE:CNH).
At year's end, a total of 12 of the hedge funds we track were bullish in this stock, a change of 0% from one quarter earlier. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably.
When looking at the hedgies we track, Mario Gabelli's GAMCO Investors had the largest position in CNH Global NV (ADR) (NYSE:CNH), worth close to $87 million, comprising 0.6% of its total 13F portfolio. On GAMCO Investors's heels is Southeastern Asset Management, managed by Mason Hawkins, which held a $60 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining hedgies with similar optimism include Brian Ashford-Russell and Tim Woolley's Polar Capital, Jeffrey Vinik's Vinik Asset Management and D. E. Shaw's D E Shaw.
Seeing as CNH Global NV (ADR) (NYSE:CNH) has experienced a declination in interest from hedge fund managers, it's safe to say that there were a few money managers who sold off their positions entirely at the end of the year. It's worth mentioning that Howard Guberman's Gruss Asset Management sold off the biggest position of the 450+ funds we track, totaling about $43 million in stock.. John Arnold's fund, Centaurus Advisors, also dropped its stock, about $20 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Bullish insider trading is particularly usable when the company in focus has seen transactions within the past half-year. Over the latest half-year time frame, CNH Global NV (ADR) (NYSE:CNH) has experienced zero unique insiders purchasing, 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 CNH Global NV (ADR) (NYSE:CNH). These stocks are Manitowoc Company, Inc. (NYSE:MTW), Deere & Company (NYSE:DE), Terex Corporation (NYSE:TEX), AGCO Corporation (NYSE:AGCO), and Joy Global Inc. (NYSE:JOY). This group of stocks are the members of the farm & construction machinery industry and their market caps resemble CNH's market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Manitowoc Company, Inc. (NYSE:MTW)||18||0||7|
|Deere & Company (NYSE:DE)||29||0||8|
|Terex Corporation (NYSE:TEX)||26||3||9|
|AGCO Corporation (NYSE:AGCO)||16||1||4|
|Joy Global Inc. (NYSE:JOY)||28||0||2|
With the returns demonstrated by our time-tested strategies, everyday investors should always keep an eye on hedge fund and insider trading activity, and CNH Global NV (ADR) (NYSE:CNH) applies perfectly to this mantra.