Hedge Funds Are Selling Permian Basin Royalty Trust (PBT)

Permian Basin Royalty Trust (NYSE:PBT) shareholders have witnessed a decrease in support from the world’s most elite money managers lately.

In the eyes of most investors, hedge funds are assumed to be slow, old financial vehicles of the past. While there are more than 8000 funds trading at present, we look at the crème de la crème of this group, about 450 funds. Most estimates calculate that this group oversees most of all hedge funds’ total asset base, and by tracking their top investments, we have identified a few investment strategies that have historically outpaced 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 24 percentage points in 7 months (see the details here).

RENAISSANCE TECHNOLOGIES

Equally as important, positive insider trading activity is another way to parse down the world of equities. As the old adage goes: there are many reasons for an upper level exec to sell shares of his or her company, but only one, very clear reason why they would buy. Various academic studies have demonstrated the impressive potential of this method if “monkeys” understand what to do (learn more here).

Keeping this in mind, we’re going to take a glance at the latest action surrounding Permian Basin Royalty Trust (NYSE:PBT).

What does the smart money think about Permian Basin Royalty Trust (NYSE:PBT)?

At year’s end, a total of 5 of the hedge funds we track were bullish in this stock, a change of 0% from the third quarter. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially.

Of the funds we track, Renaissance Technologies, managed by Jim Simons, holds the largest position in Permian Basin Royalty Trust (NYSE:PBT). Renaissance Technologies has a $2.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Lucas Capital Management, managed by Russell Lucas, which held a $2.7 million position; 1% of its 13F portfolio is allocated to the company. Other peers that hold long positions include Ken Griffin’s Citadel Investment Group, Joel Greenblatt’s Gotham Asset Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Because Permian Basin Royalty Trust (NYSE:PBT) has faced a declination in interest from hedge fund managers, logic holds that there is a sect of hedge funds that elected to cut their positions entirely at the end of the year. At the top of the heap, William Michaelcheck’s Mariner Investment Group sold off the biggest investment of all the hedgies we watch, comprising about $0.3 million in stock. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading Permian Basin Royalty Trust (NYSE:PBT)?

Insider buying is most useful when the company we’re looking at has seen transactions within the past 180 days. Over the latest half-year time frame, Permian Basin Royalty Trust (NYSE:PBT) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Permian Basin Royalty Trust (NYSE:PBT). These stocks are TransGlobe Energy Corporation (USA) (NASDAQ:TGA), Forest Oil Corporation (NYSE:FST), Contango Oil & Gas Company (NYSEAMEX:MCF), Goodrich Petroleum Corporation (NYSE:GDP), and Midstates Petroleum Company Inc (NYSE:MPO). All of these stocks are in the independent oil & gas industry and their market caps resemble PBT’s market cap.