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This Metric Says You Are Smart to Sell Molycorp Inc (NYSE:MCP)

Molycorp Inc (NYSE:MCP) was in 14 hedge funds’ portfolio at the end of December. MCP investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 23 hedge funds in our database with MCP positions at the end of the previous quarter.

Molycorp Inc (NYSE:MCP)

If you’d ask most investors, hedge funds are assumed to be worthless, outdated financial vehicles of years past. While there are more than 8000 funds trading at the moment, we at Insider Monkey look at the crème de la crème of this club, about 450 funds. Most estimates calculate that this group has its hands on the lion’s share of all hedge funds’ total asset base, and by monitoring their top equity investments, we have uncovered a number of investment strategies that have historically beaten the 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Equally as key, positive insider trading sentiment is a second way to parse down the investments you’re interested in. There are a variety of incentives for an executive to downsize shares of his or her company, but just one, very simple reason why they would buy. Plenty of academic studies have demonstrated the market-beating potential of this method if you understand where to look (learn more here).

Keeping this in mind, let’s take a peek at the key action encompassing Molycorp Inc (NYSE:MCP).

What have hedge funds been doing with Molycorp Inc (NYSE:MCP)?

At year’s end, a total of 14 of the hedge funds we track held long positions in this stock, a change of -39% from the third quarter. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially.

According to our comprehensive database, John Griffin’s Blue Ridge Capital had the most valuable position in Molycorp Inc (NYSE:MCP), worth close to $27 million, accounting for 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which held a $3 million call position; the fund has 0% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Himanshu H. Shah’s Shah Capital Management, Phil Frohlich’s Prescott Group Capital Management and Ken Griffin’s Citadel Investment Group.

Seeing as Molycorp Inc (NYSE:MCP) has witnessed declining sentiment from hedge fund managers, we can see that there is a sect of hedgies who sold off their entire stakes at the end of the year. Intriguingly, Peter J. Eichler Jr.’s Aletheia Research and Management sold off the biggest investment of all the hedgies we watch, comprising an estimated $30 million in stock., and Philippe Laffont of Coatue Management was right behind this move, as the fund sold off about $23 million worth. These transactions are interesting, as total hedge fund interest was cut by 9 funds at the end of the year.

What have insiders been doing with Molycorp Inc (NYSE:MCP)?

Insider purchases made by high-level executives is best served when the company in focus has seen transactions within the past six months. Over the latest six-month time period, Molycorp Inc (NYSE:MCP) has seen 6 unique insiders buying, and zero insider sales (see the details of insider trades here).

With the returns demonstrated by our studies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Molycorp Inc (NYSE:MCP) is no exception.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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