If you were to ask many of your peers, hedge funds are assumed to be overrated, old investment tools of an era lost to time. Although there are over 8,000 hedge funds trading today, Insider Monkey focuses on the aristocrats of this group, around 525 funds. Analysts calculate that this group controls the majority of the smart money's total capital, and by monitoring their best investments, we've revealed a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced 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 topped the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).
Equally as necessary, optimistic insider trading activity is another way to analyze the marketplace. There are a variety of motivations for a corporate insider to downsize shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this method if piggybackers know where to look (learn more here).
Furthermore, let's analyze the newest info surrounding SPX Corporation (NYSE:SPW).
At Q2's end, a total of 14 of the hedge funds we track were bullish in this stock, a change of -13% from the first quarter. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings considerably.
When using filings from the hedgies we track, Relational Investors, managed by Ralph V. Whitworth, holds the largest position in SPX Corporation (NYSE:SPW). Relational Investors has a $478.4 million position in the stock, comprising 9% of its 13F portfolio. On Relational Investors's heels is David Costen Haley of HBK Investments, with a $39.6 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include David Dreman's Dreman Value Management, Ken Griffin's Citadel Investment Group and Cliff Asness's AQR Capital Management.
Judging by the fact that SPX Corporation (NYSE:SPW) has faced bearish sentiment from upper-tier hedge fund managers, it's safe to say that there lies a certain "tier" of money managers who were dropping their full holdings heading into Q2. It's worth mentioning that Malcolm Fairbairn's Ascend Capital cut the largest stake of the 450+ funds we monitor, valued at close to $33.2 million in stock, and Phill Gross and Robert Atchinson of Adage Capital Management was right behind this move, as the fund said goodbye to about $18.2 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds heading into Q2.
Bullish insider trading is most useful when the company in question has seen transactions within the past six months. Over the last six-month time frame, SPX Corporation (NYSE:SPW) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
We'll go over the relationship between both of these indicators in other stocks similar to SPX Corporation (NYSE:SPW). These stocks are Avery Dennison Corp (NYSE:AVY), Babcock & Wilcox Co (NYSE:BWC), Nordson Corporation (NASDAQ:NDSN), Graco Inc. (NYSE:GGG), and Gardner Denver, Inc. (NYSE:GDI). This group of stocks are in the diversified machinery industry and their market caps match SPW's market cap.