Netflix, Inc. (NASDAQ:NFLX) was in 43 hedge funds’ portfolio at the end of Q2 2013, versus 48 in the previous quarter. A 5-fund drop off doesn’t seem outrageous, but taken into context, it’s important to understand. Let’s discuss the details.
According to most market participants, hedge funds are seen as slow, old investment vehicles of the past. While there are more than 8000 funds in operation today, we at Insider Monkey choose to focus on the top tier of this group, close to 450 funds. It is widely believed that this group oversees the lion’s share of the hedge fund industry’s total asset base, and by tracking their highest performing investments, we have found a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outperformed 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 outpaced the S&P 500 index by 33 percentage points in 11 months (check out a sample of our picks).
Equally as beneficial, bullish insider trading sentiment is another way to parse down the marketplace. As the old adage goes: there are plenty of stimuli for a corporate insider to cut shares of his or her company, but just one, very clear reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the useful potential of this method if piggybackers know what to do (learn more here).
Consequently, let’s take a gander at the recent action regarding Netflix, Inc. (NASDAQ:NFLX).
How are hedge funds trading Netflix, Inc. (NASDAQ:NFLX)?
Heading into Q2, a total of 43 of the hedge funds we track were long in this stock, a change of -10% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes substantially.
When looking at the hedgies we track, Icahn Capital LP, managed by Carl Icahn, holds the biggest position in Netflix, Inc. (NASDAQ:NFLX). Icahn Capital LP has a $1.1697 billion position in the stock, comprising 5.4% of its 13F portfolio. The second largest stake is held by Coatue Management, managed by Philippe Laffont, which held a $225 million position; the fund has 2.5% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Ruddock and Steve Heinz’s Lansdowne Partners and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Netflix, Inc. (NASDAQ:NFLX) has faced a declination in interest from the smart money, it’s safe to say that there were a few money managers that slashed their entire stakes heading into Q2. At the top of the heap, Daniel Benton’s Andor Capital Management cut the largest investment of the 450+ funds we watch, worth an estimated $37.9 million in stock. Jim Simons’s fund, Renaissance Technologies, also dropped its stock, about $37.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds heading into Q2.
How are insiders trading Netflix, Inc. (NASDAQ:NFLX)?
Insider purchases made by high-level executives is most useful when the company in question has seen transactions within the past half-year. Over the last half-year time frame, Netflix, Inc. (NASDAQ:NFLX) has experienced zero unique insiders purchasing, and 11 insider sales (see the details of insider trades here).
With the returns exhibited by the aforementioned studies, retail investors must always keep an eye on hedge fund and insider trading sentiment, and Netflix, Inc. (NASDAQ:NFLX) is an important part of this process.