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E TRADE Financial Corporation (ETFC): Hedge Funds and Insiders Are Bullish, What Should You Do?

Do you own shares of E TRADE Financial Corporation (NASDAQ:ETFC)?

To many market players, hedge funds are seen as overrated, old financial tools of an era lost to time. Although there are over 8,000 hedge funds with their doors open in present day, Insider Monkey aim at the upper echelon of this club, close to 525 funds. It is widely held that this group controls the majority of all hedge funds’ total capital, and by paying attention to their highest quality equity investments, we’ve formulated a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outstripped 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 33 percentage points in 11 months (explore the details and some picks here).

Just as useful, optimistic insider trading activity is a second way to analyze the investments you’re interested in. There are lots of incentives for an insider to drop shares of his or her company, but just one, very clear reason why they would buy. Various academic studies have demonstrated the valuable potential of this strategy if investors know where to look (learn more here).

Furthermore, it’s important to analyze the recent info about E TRADE Financial Corporation (NASDAQ:ETFC).

What have hedge funds been doing with E TRADE Financial Corporation (NASDAQ:ETFC)?

At Q2’s end, a total of 35 of the hedge funds we track were long in this stock, a change of 13% from the first quarter. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly.

E TRADE Financial Corporation (NASDAQ:ETFC)Out of the hedge funds we follow, Omega Advisors, managed by Leon Cooperman, holds the most valuable position in E TRADE Financial Corporation (NASDAQ:ETFC). Omega Advisors has a $100.7 million position in the stock, comprising 1.5% of its 13F portfolio. Coming in second is Robert Joseph Caruso of Select Equity Group, with a $96.9 million position; 1.4% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Rob Butts and Josh Clark’s Southpoint Capital Advisors, Edward A. Mule’s Silver Point Capital and John Griffin’s Blue Ridge Capital.

As aggregate interest spiked, certain money managers were breaking ground themselves. Omega Advisors, managed by Leon Cooperman, assembled the most outsized position in E TRADE Financial Corporation (NASDAQ:ETFC). Omega Advisors had 100.7 million invested in the company at the end of the quarter. Robert Joseph Caruso’s Select Equity Group also made a $96.9 million investment in the stock during the quarter. The following funds were also among the new ETFC investors: Rob Butts and Josh Clark’s Southpoint Capital Advisors, Edward A. Mule’s Silver Point Capital, and John Griffin’s Blue Ridge Capital.

How have insiders been trading E TRADE Financial Corporation (NASDAQ:ETFC)?

Insider buying is most useful when the company in question has seen transactions within the past 180 days. Over the last half-year time frame, E TRADE Financial Corporation (NASDAQ:ETFC) has seen 1 unique insiders buying, and 1 insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to E TRADE Financial Corporation (NASDAQ:ETFC). These stocks are BGC Partners, Inc. (NASDAQ:BGCP), Interactive Brokers Group, Inc. (NASDAQ:IBKR), TD Ameritrade Holding Corp. (NYSE:AMTD), MarketAxess Holdings Inc. (NASDAQ:MKTX), and LPL Financial Holdings Inc (NASDAQ:LPLA). This group of stocks belong to the investment brokerage – national industry and their market caps are similar to ETFC’s market cap.

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