Discover Financial Services (NYSE:DFS) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently.
If you’d ask most stock holders, hedge funds are seen as slow, outdated financial tools of the past. While there are greater than 8000 funds trading today, we look at the elite of this club, about 450 funds. Most estimates calculate that this group controls the lion’s share of all hedge funds’ total capital, and by paying attention to their highest performing investments, we have uncovered a few investment strategies that have historically beaten the S&P 500 index. 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 began to 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).
Just as beneficial, positive insider trading activity is another way to break down the world of equities. Obviously, there are a variety of stimuli for an executive to drop shares of his or her company, but just one, very simple reason why they would buy. Various empirical studies have demonstrated the valuable potential of this method if you understand what to do (learn more here).
Keeping this in mind, it’s important to take a peek at the key action encompassing Discover Financial Services (NYSE:DFS).
How have hedgies been trading Discover Financial Services (NYSE:DFS)?
At Q1’s end, a total of 46 of the hedge funds we track were long in this stock, a change of 18% from the first quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings considerably.
Of the funds we track, Donald Chiboucis’s Columbus Circle Investors had the largest position in Discover Financial Services (NYSE:DFS), worth close to $273.9 million, accounting for 2.1% of its total 13F portfolio. On Columbus Circle Investors’s heels is Daniel S. Och of OZ Management, with a $174.3 million position; 0.6% of its 13F portfolio is allocated to the stock. Other hedgies that hold long positions include Cliff Asness’s AQR Capital Management, Rob Citrone’s Discovery Capital Management and Doug Silverman and Alexander Klabin’s Senator Investment Group.
As industrywide interest jumped, some big names have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, assembled the most valuable position in Discover Financial Services (NYSE:DFS). Senator Investment Group had 101.1 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also made a $43.5 million investment in the stock during the quarter. The following funds were also among the new DFS investors: Brian Taylor’s Pine River Capital Management, Andrew Sandler’s Sandler Capital Management, and Clint Carlson’s Carlson Capital.
How have insiders been trading Discover Financial Services (NYSE:DFS)?
Insider buying is particularly usable when the company in focus has seen transactions within the past 180 days. Over the last 180-day time period, Discover Financial Services (NYSE:DFS) has seen zero unique insiders purchasing, and 7 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Discover Financial Services (NYSE:DFS). These stocks are The Western Union Company (NYSE:WU), CIT Group Inc. (NYSE:CIT), SLM Corp (NASDAQ:SLM) and Capital One Financial Corp. (NYSE:COF). This group of stocks are in the credit services industry and their market caps are closest to DFS’s market cap.