AutoNation, Inc. (NYSE:AN) was in 22 hedge funds’ portfolio at the end of December. AN investors should pay attention to an increase in activity from the world’s largest hedge funds recently. There were 16 hedge funds in our database with AN positions at the end of the previous quarter.
If you’d ask most traders, hedge funds are assumed to be unimportant, old financial vehicles of years past. While there are greater than 8000 funds with their doors open at present, we at Insider Monkey choose to focus on the top tier of this club, around 450 funds. Most estimates calculate that this group oversees most of the hedge fund industry’s total capital, and by tracking their best stock picks, we have deciphered a few investment strategies that have historically beaten the market. 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 started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (see the details here).
Equally as key, positive insider trading activity is another way to parse down the stock market universe. There are lots of stimuli for an insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Plenty of empirical studies have demonstrated the impressive potential of this tactic if “monkeys” understand what to do (learn more here).
With these “truths” under our belt, we’re going to take a glance at the recent action regarding AutoNation, Inc. (NYSE:AN).
What have hedge funds been doing with AutoNation, Inc. (NYSE:AN)?
Heading into 2013, a total of 22 of the hedge funds we track held long positions in this stock, a change of 38% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially.
Of the funds we track, Edward Lampert’s ESL Investments had the biggest position in AutoNation, Inc. (NYSE:AN), worth close to $1.374 billion, comprising 35.8% of its total 13F portfolio. Sitting at the No. 2 spot is Horizon Asset Management, managed by Murray Stahl, which held a $140 million position; 1% of its 13F portfolio is allocated to the stock. Other hedge funds that hold long positions include Michael Larson’s Bill & Melinda Gates Foundation Trust, Mario Gabelli’s GAMCO Investors and D. E. Shaw’s D E Shaw.
Consequently, specific money managers have been driving this bullishness. Highland Capital Management, managed by James Dondero, established the most outsized position in AutoNation, Inc. (NYSE:AN). Highland Capital Management had 10 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also initiated a $6 million position during the quarter. The following funds were also among the new AN investors: Israel Englander’s Millennium Management, Joel Greenblatt’s Gotham Asset Management, and James Pallotta’s Raptor Capital Management.
How are insiders trading AutoNation, Inc. (NYSE:AN)?
Insider trading activity, especially when it’s bullish, is best served when the primary stock in question has seen transactions within the past 180 days. Over the last 180-day time period, AutoNation, Inc. (NYSE:AN) has experienced zero unique insiders purchasing, and 9 insider sales (see the details of insider trades here).
With the returns exhibited by Insider Monkey’s research, everyday investors should always monitor hedge fund and insider trading sentiment, and AutoNation, Inc. (NYSE:AN) 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.