Time Warner Cable Inc (NYSE:TWC) investors should pay attention to a decrease in activity from the world's largest hedge funds in recent months.
To most market participants, hedge funds are viewed as slow, outdated financial vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, we at Insider Monkey hone in on the leaders of this club, around 450 funds. Most estimates calculate that this group controls the lion's share of the hedge fund industry's total asset base, and by monitoring their best investments, we have uncovered a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outpaced 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 topped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).
Just as important, positive insider trading activity is a second way to parse down the investments you're interested in. There are many incentives for an executive to drop shares of his or her company, but only one, very obvious reason why they would buy. Several empirical studies have demonstrated the valuable potential of this strategy if shareholders know what to do (learn more here).
Keeping this in mind, let's take a peek at the key action encompassing Time Warner Cable Inc (NYSE:TWC).
At year's end, a total of 37 of the hedge funds we track were long in this stock, a change of -8% from the third quarter. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully.
When looking at the hedgies we track, Coatue Management, managed by Philippe Laffont, holds the most valuable position in Time Warner Cable Inc (NYSE:TWC). Coatue Management has a $325 million billion position in the stock, comprising 5.3% of its 13F portfolio. Coming in second is Highfields Capital Management, managed by Jonathon Jacobson, which held a $239 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining hedgies with similar optimism include Paul Ruddockáand Steve Heinz's Lansdowne Partners, Larry Robbins's Glenview Capital and John Shapiro's Chieftain Capital.
Because Time Warner Cable Inc (NYSE:TWC) has experienced falling interest from the smart money, we can see that there was a specific group of hedgies who were dropping their positions entirely in Q4. At the top of the heap, Dinakar Singh's TPG-AXON Management LP cut the largest investment of the "upper crust" of funds we watch, worth an estimated $73 million in stock. Michael Karsch's fund, Karsch Capital Management, also cut its stock, about $66 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds in Q4.
Insider buying is best served when the primary stock in question has seen transactions within the past six months. Over the latest six-month time frame, Time Warner Cable Inc (NYSE:TWC) has seen zero unique insiders buying, and 8 insider sales (see the details of insider trades here).
With the returns exhibited by our tactics, retail investors should always keep an eye on hedge fund and insider trading activity, and Time Warner Cable Inc (NYSE:TWC) is an important part of this process.
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.