Herbalife Ltd. (NYSE:HLF) has seen a decrease in enthusiasm from smart money of late.
If you'd ask most market participants, hedge funds are assumed to be slow, outdated financial tools of the past. While there are greater than 8000 funds trading today, we at Insider Monkey hone in on the moguls of this club, around 450 funds. It is estimated that this group oversees the lion's share of the hedge fund industry's total capital, and by tracking their best equity investments, we have formulated a few investment strategies that have historically outstripped the S&P 500 index. 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Just as key, optimistic insider trading activity is a second way to parse down the marketplace. Just as you'd expect, there are a number of incentives for a bullish insider to drop shares of his or her company, but just one, very obvious reason why they would buy. Various academic studies have demonstrated the useful potential of this tactic if investors know what to do (learn more here).
With these "truths" under our belt, we're going to take a look at the recent action encompassing Herbalife Ltd. (NYSE:HLF).
At the end of the first quarter, a total of 30 of the hedge funds we track held long positions in this stock, a change of -19% from the first quarter. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings substantially.
According to our comprehensive database, Icahn Capital LP, managed by Carl Icahn, holds the most valuable position in Herbalife Ltd. (NYSE:HLF). Icahn Capital LP has a $612.5 million position in the stock, comprising 3.6% of its 13F portfolio. On Icahn Capital LP's heels is Steven Richman of East Side Capital (RR Partners), with a $113.1 million position; 5.7% of its 13F portfolio is allocated to the stock. Remaining hedge funds that hold long positions include Patrick McCormack's Tiger Consumer Management, D. E. Shaw's D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Due to the fact that Herbalife Ltd. (NYSE:HLF) has experienced bearish sentiment from the smart money, we can see that there were a few hedge funds that elected to cut their entire stakes last quarter. Intriguingly, Ken Heebner's Capital Growth Management dumped the largest position of all the hedgies we key on, worth an estimated $110.2 million in stock., and Dan Loeb of Third Point was right behind this move, as the fund sold off about $102.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds last quarter.
Bullish insider trading is at its handiest when the company in focus has seen transactions within the past half-year. Over the last six-month time frame, Herbalife Ltd. (NYSE:HLF) has experienced 1 unique insiders buying, and 0 insider sales (see the details of insider trades here).
With the returns shown by Insider Monkey's time-tested strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and Herbalife Ltd. (NYSE:HLF) shareholders fit into this picture quite nicely.