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Hedge Funds Aren’t Crazy About The Southern Company (SO) Anymore

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The Southern Company (NYSE:SO) was in 14 hedge funds’ portfolio at the end of March. SO has experienced a decrease in hedge fund interest of late. There were 15 hedge funds in our database with SO positions at the end of the previous quarter.

The Southern Company (NYSE:SO)According to most traders, hedge funds are viewed as unimportant, outdated investment tools of the past. While there are greater than 8000 funds trading today, we at Insider Monkey look at the elite of this group, about 450 funds. It is widely believed that this group oversees the lion’s share of the hedge fund industry’s total capital, and by monitoring their highest performing picks, we have discovered a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum 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 23.3 percentage points in 8 months (see all of our picks from August).

Equally as important, bullish insider trading sentiment is a second way to break down the financial markets. As the old adage goes: there are many incentives for an insider to get rid of shares of his or her company, but just one, very obvious reason why they would behave bullishly. Several academic studies have demonstrated the impressive potential of this method if you know what to do (learn more here).

Consequently, it’s important to take a gander at the recent action surrounding The Southern Company (NYSE:SO).

Hedge fund activity in The Southern Company (NYSE:SO)

Heading into Q2, a total of 14 of the hedge funds we track held long positions in this stock, a change of -7% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings considerably.

According to our comprehensive database, David Harding’s Winton Capital Management had the largest position in The Southern Company (NYSE:SO), worth close to $24.5 million, comprising 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which held a $18 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Israel Englander’s Millennium Management, Michael Messner’s Seminole Capital (Investment Mgmt) and Ken Gray and Steve Walsh’s Bryn Mawr Capital.

Since The Southern Company (NYSE:SO) has witnessed falling interest from the smart money, logic holds that there were a few hedge funds who were dropping their positions entirely in Q1. It’s worth mentioning that Stanley Druckenmiller’s Duquesne Capital said goodbye to the largest investment of all the hedgies we monitor, comprising about $49.6 million in stock., and Sean Cullinan of Point State Capital was right behind this move, as the fund dropped about $25 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in Q1.

How are insiders trading The Southern Company (NYSE:SO)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company we’re looking at has seen transactions within the past half-year. Over the last 180-day time period, The Southern Company (NYSE:SO) has seen 1 unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to The Southern Company (NYSE:SO). These stocks are PG&E Corporation (NYSE:PCG), American Electric Power Company, Inc. (NYSE:AEP), Duke Energy Corp (NYSE:DUK), NextEra Energy, Inc. (NYSE:NEE), and Dominion Resources, Inc. (NYSE:D). This group of stocks are in the electric utilities industry and their market caps match SO’s market cap.

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