Is Plains All American Pipeline, L.P. (NYSE:PAA) a buy here? Hedge funds are turning less bullish. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience
According to most stock holders, hedge funds are viewed as worthless, old financial tools of yesteryear. While there are more than 8000 funds in operation at the moment, we look at the top tier of this group, close to 450 funds. It is estimated that this group oversees most of the smart money’s total capital, and by watching their best equity investments, we have deciphered a number of investment strategies that have historically outstripped Mr. 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 began to sharing our picks with our subscribers at the end of August 2012, we have trumped 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 sentiment is another way to parse down the financial markets. As the old adage goes: there are a variety of stimuli for an upper level exec to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this strategy if you know what to do (learn more here).
With these “truths” under our belt, it’s important to take a glance at the latest action encompassing Plains All American Pipeline, L.P. (NYSE:PAA).
What does the smart money think about Plains All American Pipeline, L.P. (NYSE:PAA)?
Heading into Q2, a total of 11 of the hedge funds we track were bullish in this stock, a change of 0% from the first quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably.
Judging by the fact that Plains All American Pipeline, L.P. (NYSE:PAA) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of funds who were dropping their entire stakes at the end of the first quarter. Intriguingly, Russell Lucas’s Lucas Capital Management sold off the biggest stake of the 450+ funds we monitor, totaling close to $4.6 million in stock.. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its stock, about $0.4 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
How are insiders trading Plains All American Pipeline, L.P. (NYSE:PAA)?
Insider buying is at its handiest when the primary stock in question has experienced transactions within the past 180 days. Over the last six-month time period, Plains All American Pipeline, L.P. (NYSE:PAA) has seen zero unique insiders buying, and 3 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Plains All American Pipeline, L.P. (NYSE:PAA). These stocks are Oneok Partners LP (NYSE:OKS), Williams Companies, Inc. (NYSE:WMB), Energy Transfer Partners LP (NYSE:ETP), Energy Transfer Equity, L.P. (NYSE:ETE), and Spectra Energy Corp. (NYSE:SE). This group of stocks are in the oil & gas pipelines industry and their market caps are closest to PAA’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Oneok Partners LP (NYSE:OKS) | 4 | 1 | 0 |
| Williams Companies, Inc. (NYSE:WMB) | 41 | 1 | 5 |
| Energy Transfer Partners LP (NYSE:ETP) | 13 | 0 | 0 |
| Energy Transfer Equity, L.P. (NYSE:ETE) | 12 | 1 | 0 |
| Spectra Energy Corp. (NYSE:SE) | 20 | 0 | 5 |
With the returns shown by our research, retail investors must always pay attention to hedge fund and insider trading sentiment, and Plains All American Pipeline, L.P. (NYSE:PAA) shareholders fit into this picture quite nicely.
