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Hedge Funds Aren’t Crazy About Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) Anymore

Is Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) going to take off soon? Hedge funds are taking a pessimistic view. The number of bullish hedge fund bets fell by 5 in recent months.

According to most traders, hedge funds are perceived as unimportant, outdated financial tools of the past. While there are greater than 8000 funds in operation at present, we at Insider Monkey look at the aristocrats of this club, close to 450 funds. It is widely believed that this group has its hands on most of the hedge fund industry’s total capital, and by monitoring their best picks, we have figured out a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced 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 outclassed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Royal Bank of Scotland Group plc (ADR) (NYSE:RBS)Equally as integral, positive insider trading sentiment is a second way to break down the stock market universe. Just as you’d expect, there are plenty of reasons for an upper level exec to get rid of shares of his or her company, but only one, very simple reason why they would buy. Various academic studies have demonstrated the useful potential of this strategy if piggybackers know where to look (learn more here).

With all of this in mind, let’s take a glance at the key action surrounding Royal Bank of Scotland Group plc (ADR) (NYSE:RBS).

What have hedge funds been doing with Royal Bank of Scotland Group plc (ADR) (NYSE:RBS)?

At the end of the fourth quarter, a total of 12 of the hedge funds we track held long positions in this stock, a change of -29% from the third quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly.

Of the funds we track, John Thiessen’s Vertex One Asset Management had the biggest position in Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), worth close to $45 million, accounting for 8.1% of its total 13F portfolio. On Vertex One Asset Management’s heels is Daniel Arbess of Xerion, with a $33 million position; 0.6% of its 13F portfolio is allocated to the stock.

Seeing as Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few funds that slashed their full holdings in Q4. At the top of the heap, Dan Loeb’s Third Point dropped the biggest stake of the “upper crust” of funds we track, totaling about $26 million in stock., and David Abrams of Abrams Capital Management was right behind this move, as the fund cut about $25 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds in Q4.

How have insiders been trading Royal Bank of Scotland Group plc (ADR) (NYSE:RBS)?

Insider purchases made by high-level executives is best served when the company we’re looking at has experienced transactions within the past half-year. Over the latest six-month time period, Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the results exhibited by the aforementioned strategies, retail investors must always watch hedge fund and insider trading sentiment, and Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) shareholders fit into this picture quite nicely.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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