Is Mechel OAO (ADR) (NYSE:MTL) a buy here? The best stock pickers are becoming less hopeful. The number of long hedge fund bets decreased by 3 in recent months.
According to most stock holders, hedge funds are perceived as slow, outdated financial tools of the past. While there are over 8000 funds trading at the moment, we look at the bigwigs of this club, about 450 funds. It is estimated that this group controls most of the hedge fund industry’s total asset base, and by paying attention to their best stock picks, we have determined a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Equally as key, optimistic insider trading sentiment is another way to parse down the world of equities. Obviously, there are a number of stimuli for an insider to drop shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various academic studies have demonstrated the impressive potential of this strategy if “monkeys” know where to look (learn more here).
With these “truths” under our belt, let’s take a peek at the recent action regarding Mechel OAO (ADR) (NYSE:MTL).
What does the smart money think about Mechel OAO (ADR) (NYSE:MTL)?
Heading into Q2, a total of 8 of the hedge funds we track were bullish in this stock, a change of -27% from the first quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully.
When looking at the hedgies we track, Jim Simons’s Renaissance Technologies had the most valuable position in Mechel OAO (ADR) (NYSE:MTL), worth close to $2.6 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Jane Mendillo of Harvard Management Co, with a $0.6 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedge funds that hold long positions include Ken Griffin’s Citadel Investment Group, Matthew Hulsizer’s PEAK6 Capital Management and Mike Vranos’s Ellington.
Judging by the fact that Mechel OAO (ADR) (NYSE:MTL) has faced falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few fund managers that slashed their full holdings last quarter. At the top of the heap, Philippe Jabre’s Jabre Capital Partners said goodbye to the largest investment of all the hedgies we monitor, comprising close to $1.2 million in stock., and David Costen Haley of HBK Investments was right behind this move, as the fund cut about $1 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds last quarter.
What have insiders been doing with Mechel OAO (ADR) (NYSE:MTL)?
Insider trading activity, especially when it’s bullish, is particularly usable when the company in focus has seen transactions within the past six months. Over the latest six-month time period, Mechel OAO (ADR) (NYSE:MTL) has experienced zero unique insiders purchasing, and zero 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 Mechel OAO (ADR) (NYSE:MTL). These stocks are Ternium S.A. (ADR) (NYSE:TX), Harsco Corporation (NYSE:HSC), Steel Dynamics, Inc. (NASDAQ:STLD), Grupo Simec S.A.B. de C.V. (ADR) (NYSEAMEX:SIM), and United States Steel Corporation (NYSE:X). All of these stocks are in the steel & iron industry and their market caps resemble MTL’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Ternium S.A. (ADR) (NYSE:TX)||9||0||0|
|Harsco Corporation (NYSE:HSC)||13||0||2|
|Steel Dynamics, Inc. (NASDAQ:STLD)||17||0||1|
|Grupo Simec S.A.B. de C.V. (ADR) (NYSEAMEX:SIM)||1||0||0|
|United States Steel Corporation (NYSE:X)||21||2||0|
With the returns exhibited by our tactics, everyday investors must always keep an eye on hedge fund and insider trading activity, and Mechel OAO (ADR) (NYSE:MTL) applies perfectly to this mantra.