American Realty Capital Trust Inc (NASDAQ:ARCT): Hedge Funds and Insiders Are Bearish, What Should You Do?

Is American Realty Capital Trust Inc (NASDAQ:ARCT) worth your attention right now? Prominent investors are becoming less hopeful. The number of bullish hedge fund positions decreased by 7 recently.

Christian Leone

According to most investors, hedge funds are perceived as unimportant, old investment tools of years past. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey choose to focus on the leaders of this club, about 450 funds. It is estimated that this group controls the majority of the hedge fund industry’s total capital, and by watching their top stock picks, we have spotted a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat 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 trumped the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Equally as important, optimistic insider trading activity is another way to parse down the financial markets. Just as you’d expect, there are a number of incentives for an upper level exec to get rid of shares of his or her company, but just one, very clear reason why they would initiate a purchase. Plenty of academic studies have demonstrated the useful potential of this strategy if shareholders know where to look (learn more here).

With these “truths” under our belt, we’re going to take a gander at the recent action encompassing American Realty Capital Trust Inc (NASDAQ:ARCT).

Hedge fund activity in American Realty Capital Trust Inc (NASDAQ:ARCT)

Heading into 2013, a total of 23 of the hedge funds we track were long in this stock, a change of -23% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably.

When looking at the hedgies we track, Christian Leone’s Luxor Capital Group had the most valuable position in American Realty Capital Trust Inc (NASDAQ:ARCT), worth close to $121 million, accounting for 4.2% of its total 13F portfolio. Coming in second is John Arnold of Centaurus Advisors, with a $30 million position; the fund has 28.7% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Tom Sandell’s Sandell Asset Management, Israel Englander’s Millennium Management and Curtis Schenker and Craig Effron’s Scoggin.

Since American Realty Capital Trust Inc (NASDAQ:ARCT) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that decided to sell off their positions entirely in Q4. Intriguingly, Barry Rosenstein’s JANA Partners sold off the largest position of the 450+ funds we watch, totaling an estimated $58 million in stock.. Alec Litowitz and Ross Laser’s fund, Magnetar Capital, also dropped its stock, about $31 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 7 funds in Q4.

How are insiders trading American Realty Capital Trust Inc (NASDAQ:ARCT)?

Insider buying is best served when the company in focus has seen transactions within the past six months. Over the last half-year time period, American Realty Capital Trust Inc (NASDAQ:ARCT) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the returns exhibited by Insider Monkey’s tactics, retail investors must always watch hedge fund and insider trading sentiment, and American Realty Capital Trust Inc (NASDAQ:ARCT) is no exception.

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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.