Is E TRADE Financial Corporation (NASDAQ:ETFC) a healthy stock for your portfolio? Prominent investors are in a pessimistic mood. The number of bullish hedge fund bets went down by 4 in recent months.
If you’d ask most shareholders, hedge funds are seen as worthless, old financial vehicles of the past. While there are more than 8000 funds in operation today, we look at the crème de la crème of this group, close to 450 funds. It is estimated that this group has its hands on most of all hedge funds’ total capital, and by paying attention to their top picks, we have identified a few investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Equally as important, positive insider trading sentiment is another way to parse down the stock market universe. There are a variety of stimuli for an upper level exec to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Several academic studies have demonstrated the useful potential of this method if investors know where to look (learn more here).
With these “truths” under our belt, it’s important to take a glance at the recent action surrounding E TRADE Financial Corporation (NASDAQ:ETFC).
Hedge fund activity in E TRADE Financial Corporation (NASDAQ:ETFC)
Heading into Q2, a total of 31 of the hedge funds we track were bullish in this stock, a change of -11% from the first quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully.
When looking at the hedgies we track, Robert Joseph Caruso’s Select Equity Group had the most valuable position in E TRADE Financial Corporation (NASDAQ:ETFC), worth close to $139.2 million, accounting for 1.9% of its total 13F portfolio. Coming in second is Omega Advisors, managed by Leon Cooperman, which held a $85.2 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include Larry Robbins’s Glenview Capital, Edward A. Mule’s Silver Point Capital and Robert Pitts’s Steadfast Capital Management.
Due to the fact that E TRADE Financial Corporation (NASDAQ:ETFC) has faced bearish sentiment from the smart money, logic holds that there were a few fund managers who were dropping their positions entirely heading into Q2. At the top of the heap, Doug Silverman and Alexander Klabin’s Senator Investment Group cut the biggest stake of the 450+ funds we watch, valued at close to $67.1 million in stock.. Jeffrey Altman’s fund, Owl Creek Asset Management, also dumped its stock, about $31.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 4 funds heading into Q2.
How are insiders trading E TRADE Financial Corporation (NASDAQ:ETFC)?
Insider purchases made by high-level executives is particularly usable when the company in question has experienced transactions within the past six months. Over the latest six-month time frame, E TRADE Financial Corporation (NASDAQ:ETFC) has experienced 1 unique insiders buying, and 1 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity 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 are in the investment brokerage – national industry and their market caps match ETFC’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|BGC Partners, Inc. (NASDAQ:BGCP)||8||0||0|
|Interactive Brokers Group, Inc. (NASDAQ:IBKR)||13||0||3|
|TD Ameritrade Holding Corp. (NYSE:AMTD)||18||2||7|
|MarketAxess Holdings Inc. (NASDAQ:MKTX)||9||0||3|
|LPL Financial Holdings Inc (NASDAQ:LPLA)||14||0||5|
With the returns exhibited by our tactics, retail investors should always monitor hedge fund and insider trading sentiment, and E TRADE Financial Corporation (NASDAQ:ETFC) shareholders fit into this picture quite nicely.