American Express Company (NYSE:AXP) has experienced a decrease in activity from the world’s largest hedge funds of late.
According to most market participants, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, we hone in on the crème de la crème of this club, around 450 funds. It is widely believed that this group controls most of the hedge fund industry’s total asset base, and by watching their best stock picks, we have uncovered a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Equally as important, optimistic insider trading activity is another way to break down the stock market universe. Just as you’d expect, there are many motivations for an insider to sell shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the impressive potential of this strategy if “monkeys” know what to do (learn more here).
Keeping this in mind, let’s take a glance at the recent action encompassing American Express Company (NYSE:AXP).
How have hedgies been trading American Express Company (NYSE:AXP)?
Heading into Q2, a total of 47 of the hedge funds we track were long in this stock, a change of -15% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes substantially.
Of the funds we track, Warren Buffett’s Berkshire Hathaway had the largest position in American Express Company (NYSE:AXP), worth close to $10.2277 billion, comprising 12% of its total 13F portfolio. The second largest stake is held by Fisher Asset Management, managed by Ken Fisher, which held a $729 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Jean-Marie Eveillard’s First Eagle Investment Management, John Armitage’s Egerton Capital Limited and Mario Gabelli’s GAMCO Investors.
Since American Express Company (NYSE:AXP) has experienced declining sentiment from the smart money, we can see that there exists a select few funds that decided to sell off their entire stakes heading into Q2. At the top of the heap, D. E. Shaw’s D E Shaw said goodbye to the biggest position of the 450+ funds we watch, totaling an estimated $44.9 million in call options. George Soros’s fund, Soros Fund Management, also dumped its stock, about $24.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds heading into Q2.
What do corporate executives and insiders think about American Express Company (NYSE:AXP)?
Insider trading activity, especially when it’s bullish, is most useful when the primary stock in question has seen transactions within the past six months. Over the last 180-day time period, American Express Company (NYSE:AXP) has experienced 1 unique insiders purchasing, and 14 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to American Express Company (NYSE:AXP). These stocks are CIT Group Inc. (NYSE:CIT), SLM Corp (NASDAQ:SLM), Discover Financial Services (NYSE:DFS), and Capital One Financial Corp. (NYSE:COF). All of these stocks are in the credit services industry and their market caps match AXP’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| CIT Group Inc. (NYSE:CIT) | 46 | 0 | 0 |
| SLM Corp (NASDAQ:SLM) | 30 | 0 | 4 |
| Discover Financial Services (NYSE:DFS) | 46 | 0 | 7 |
| Capital One Financial Corp. (NYSE:COF) | 58 | 2 | 6 |
With the returns exhibited by the aforementioned tactics, retail investors should always keep an eye on hedge fund and insider trading activity, and American Express Company (NYSE:AXP) shareholders fit into this picture quite nicely.
