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This Metric Says You Are Smart to Sell Rosetta Resources Inc. (NASDAQ:ROSE) – Newfield Exploration Co. (NYSE:NFX), Berry Petroleum Company (NYSE:BRY)

Is Rosetta Resources Inc. (NASDAQ:ROSE) going to take off soon? Investors who are in the know are getting less optimistic. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience.

If you’d ask most market participants, hedge funds are assumed to be unimportant, outdated investment vehicles of yesteryear. While there are more than 8000 funds trading at the moment, we at Insider Monkey look at the moguls of this club, about 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total asset base, and by tracking their best stock picks, we have discovered a few investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum 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 trumped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Berry Petroleum Company (NYSE:BRY)

Just as key, optimistic insider trading sentiment is a second way to parse down the investments you’re interested in. Just as you’d expect, there are a variety of reasons for an executive to get rid of shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the useful potential of this strategy if piggybackers understand what to do (learn more here).

With these “truths” under our belt, it’s important to take a glance at the latest action encompassing Rosetta Resources Inc. (NASDAQ:ROSE).

What does the smart money think about Rosetta Resources Inc. (NASDAQ:ROSE)?

Heading into 2013, a total of 14 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably.

Of the funds we track, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital had the most valuable position in Rosetta Resources Inc. (NASDAQ:ROSE), worth close to $115 million, accounting for 0.6% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which held a $91 million position; 0.6% of its 13F portfolio is allocated to the company. Some other hedge funds with similar optimism include Steven Richman’s East Side Capital (RR Partners), Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors.

Judging by the fact that Rosetta Resources Inc. (NASDAQ:ROSE) has experienced falling interest from hedge fund managers, logic holds that there is a sect of hedgies who were dropping their positions entirely last quarter. At the top of the heap, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC dumped the largest investment of all the hedgies we track, comprising close to $147 million in stock., and Sean Cullinan of Point State Capital was right behind this move, as the fund cut about $5 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with Rosetta Resources Inc. (NASDAQ:ROSE)?

Bullish insider trading is best served when the primary stock in question has seen transactions within the past half-year. Over the last 180-day time frame, Rosetta Resources Inc. (NASDAQ:ROSE) has seen 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 Rosetta Resources Inc. (NASDAQ:ROSE). These stocks are Ultra Petroleum Corp. (NYSE:UPL), Newfield Exploration Co. (NYSE:NFX), Mcmoran Exploration Co (NYSE:MMR), Laredo Petroleum Holdings Inc (NYSE:LPI), and Berry Petroleum Company (NYSE:BRY). This group of stocks are in the independent oil & gas industry and their market caps are similar to ROSE’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Ultra Petroleum Corp. (NYSE:UPL) 19 2 0
Newfield Exploration Co. (NYSE:NFX) 22 0 4
Mcmoran Exploration Co (NYSE:MMR) 28 0 3
Laredo Petroleum Holdings Inc (NYSE:LPI) 4 0 4
Berry Petroleum Company (NYSE:BRY) 7 2 11

With the results exhibited by Insider Monkey’s tactics, retail investors must always keep an eye on hedge fund and insider trading sentiment, and Rosetta Resources Inc. (NASDAQ:ROSE) shareholders fit into this picture quite nicely.

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

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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