Is Ares Capital Corporation (ARCC) Going to Burn These Hedge Funds?

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Now, according to many investors, hedge funds are seen as useless, old investment vehicles of a period lost to current times. Although there are In excess of 8,000 hedge funds trading today, Insider Monkey looks at the elite of this group, close to 525 funds. It is assumed that this group controls most of the smart money’s total capital, and by keeping an eye on their highest performing equity investments, we’ve spotted a few investment strategies that have historically outstripped the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per 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 trumped the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as key, bullish insider trading sentiment is a second way to analyze the world of equities. There are lots of stimuli for an upper level exec to sell shares of his or her company, but only one, very obvious reason why they would buy. Many academic studies have demonstrated the valuable potential of this tactic if “monkeys” know what to do (learn more here).

Ares Capital Corporation (NASDAQ:ARCC)

Now that that’s out of the way, it’s important to analyze the newest info about Ares Capital Corporation (NASDAQ:ARCC).

What have hedge funds been doing with Ares Capital Corporation (NASDAQ:ARCC)?

Heading into Q3, a total of 17 of the hedge funds we track held long positions in this stock, a change of 6% from the first quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully.

According to our 13F database, John Overdeck and David Siegel’s Two Sigma Advisors had the most valuable position in Ares Capital Corporation (NASDAQ:ARCC), worth close to $29.7 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 $17.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include D. E. Shaw’s D E Shaw, Amy Minella’s Cardinal Capital and Anand Parekh’s Alyeska Investment Group.

As one would understandably expect, specific money managers have jumped into Ares Capital Corporation (NASDAQ:ARCC) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the most outsized position in Ares Capital Corporation (NASDAQ:ARCC). Two Sigma Advisors had 29.7 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $17.7 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Amy Minella’s Cardinal Capital, and Anand Parekh’s Alyeska Investment Group.

How are insiders trading Ares Capital Corporation (NASDAQ:ARCC)?

Insider buying is at its handiest when the company in question has experienced transactions within the past six months. Over the latest half-year time period, Ares Capital Corporation (NASDAQ:ARCC) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Ares Capital Corporation (NASDAQ:ARCC). These stocks are NYSE Euronext (NYSE:NYX), A.F.P Provida SA (ADR) (NYSE:PVD), Apollo Global Management LLC (NYSE:APO), CBOE Holdings, Inc (NASDAQ:CBOE), and NASDAQ OMX Group, Inc. (NASDAQ:NDAQ). This group of stocks are in the diversified investments industry and their market caps resemble ARCC’s market cap.

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