Is Dynegy Inc. (NYSE:DYN) a cheap investment today? Money managers are taking a bullish view. The number of long hedge fund bets improved by 2 recently.
According to most stock holders, hedge funds are assumed to be slow, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey hone in on the bigwigs of this group, about 450 funds. Most estimates calculate that this group has its hands on the majority of all hedge funds’ total asset base, and by keeping an eye on their top investments, we have brought to light a few investment strategies that have historically outperformed the broader indices. 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 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 financial markets. Obviously, there are lots of incentives for an upper level exec to drop shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the valuable potential of this strategy if you know where to look (learn more here).
With all of this in mind, let’s take a gander at the latest action encompassing Dynegy Inc. (NYSE:DYN).
What does the smart money think about Dynegy Inc. (NYSE:DYN)?
At the end of the first quarter, a total of 18 of the hedge funds we track held long positions in this stock, a change of 13% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably.
When looking at the hedgies we track, Howard Marks’s Oaktree Capital Management had the biggest position in Dynegy Inc. (NYSE:DYN), worth close to $173.3 million, accounting for 3.5% of its total 13F portfolio. Sitting at the No. 2 spot is Avenue Capital, managed by Marc Lasry, which held a $107.5 million position; 18.4% of its 13F portfolio is allocated to the stock. Some other hedge funds that hold long positions include Don Morgan’s Brigade Capital, Brian J. Higgins’s King Street Capital and Nick Niell’s Arrowgrass Capital Partners.
Now, some big names have been driving this bullishness. King Street Capital, managed by Brian J. Higgins, initiated the biggest position in Dynegy Inc. (NYSE:DYN). King Street Capital had 48 million invested in the company at the end of the quarter. Tom Wagner and Ara Cohen’s Knighthead Capital also made a $42.1 million investment in the stock during the quarter. The other funds with brand new DYN positions are Michael Hintze’s CQS Cayman LP, Jim Simons’s Renaissance Technologies, and Jamie Zimmerman’s Litespeed Management.
How have insiders been trading Dynegy Inc. (NYSE:DYN)?
Insider purchases made by high-level executives is at its handiest when the company in question has seen transactions within the past half-year. Over the last six-month time period, Dynegy Inc. (NYSE:DYN) has seen zero 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 Dynegy Inc. (NYSE:DYN). These stocks are Portland General Electric Company (NYSE:POR), IDACORP Inc (NYSE:IDA), Great Plains Energy Incorporated (NYSE:GXP), Hawaiian Electric Industries, Inc. (NYSE:HE), and Cleco Corporation (NYSE:CNL). This group of stocks belong to the electric utilities industry and their market caps are closest to DYN’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Portland General Electric Company (NYSE:POR)||14||0||1|
|IDACORP Inc (NYSE:IDA)||7||0||8|
|Great Plains Energy Incorporated (NYSE:GXP)||15||0||3|
|Hawaiian Electric Industries, Inc. (NYSE:HE)||10||1||0|
|Cleco Corporation (NYSE:CNL)||10||0||0|
With the returns demonstrated by our strategies, retail investors should always monitor hedge fund and insider trading sentiment, and Dynegy Inc. (NYSE:DYN) is no exception.