In the eyes of most investors, hedge funds are assumed to be worthless, old investment tools of years past. While there are over 8000 funds in operation at the moment, we at Insider Monkey look at the masters of this group, about 450 funds. It is estimated that this group has its hands on the lion’s share of the smart money’s total asset base, and by monitoring their best investments, we have uncovered a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually 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 (explore the details and some picks here).
Just as integral, positive insider trading activity is a second way to break down the financial markets. There are a variety of reasons for an executive to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Many empirical studies have demonstrated the valuable potential of this method if piggybackers understand where to look (learn more here).
Now, it’s important to take a gander at the latest action encompassing Embraer SA (ADR) (NYSE:ERJ).
How have hedgies been trading Embraer SA (ADR) (NYSE:ERJ)?
Heading into Q2, a total of 11 of the hedge funds we track held long positions in this stock, a change of 22% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially.
According to our comprehensive database, Ken Fisher’s Fisher Asset Management had the biggest position in Embraer SA (ADR) (NYSE:ERJ), worth close to $43.6 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $23.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedgies that hold long positions include Michael Messner’s Seminole Capital (Investment Mgmt), Rob Citrone’s Discovery Capital Management and Israel Englander’s Millennium Management.
Consequently, key hedge funds have been driving this bullishness. Seminole Capital (Investment Mgmt), managed by Michael Messner, created the most valuable position in Embraer SA (ADR) (NYSE:ERJ). Seminole Capital (Investment Mgmt) had 22.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $10.5 million investment in the stock during the quarter. The other funds with brand new ERJ positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Bruce Kovner’s Caxton Associates LP.
How have insiders been trading Embraer SA (ADR) (NYSE:ERJ)?
Bullish insider trading is particularly usable when the company we’re looking at has seen transactions within the past 180 days. Over the last half-year time period, Embraer SA (ADR) (NYSE:ERJ) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Embraer SA (ADR) (NYSE:ERJ). These stocks are Triumph Group Inc (NYSE:TGI), Rockwell Collins, Inc. (NYSE:COL), TransDigm Group Incorporated (NYSE:TDG), L-3 Communications Holdings, Inc. (NYSE:LLL), and B/E Aerospace Inc (NASDAQ:BEAV). This group of stocks are in the aerospace/defense products & services industry and their market caps are similar to ERJ’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Triumph Group Inc (NYSE:TGI) | 22 | 2 | 3 |
| Rockwell Collins, Inc. (NYSE:COL) | 19 | 0 | 12 |
| TransDigm Group Incorporated (NYSE:TDG) | 39 | 1 | 5 |
| L-3 Communications Holdings, Inc. (NYSE:LLL) | 14 | 0 | 11 |
| B/E Aerospace Inc (NASDAQ:BEAV) | 35 | 0 | 9 |
With the results exhibited by Insider Monkey’s time-tested strategies, everyday investors must always pay attention to hedge fund and insider trading sentiment, and Embraer SA (ADR) (NYSE:ERJ) is no exception.
