Is Morgan Stanley (NYSE:MS) ready to rally soon? Hedge funds are turning less bullish. The number of long hedge fund bets dropped by 3 recently.
To the average investor, there are a multitude of metrics market participants can use to watch stocks. Two of the most underrated are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass their index-focused peers by a significant amount (see just how much).
Just as important, positive insider trading activity is another way to parse down the investments you’re interested in. Just as you’d expect, there are a variety of motivations for a bullish insider to sell shares of his or her company, but just one, very clear reason why they would behave bullishly. Plenty of academic studies have demonstrated the market-beating potential of this strategy if piggybackers understand where to look (learn more here).
Consequently, let’s take a look at the latest action encompassing Morgan Stanley (NYSE:MS).
How have hedgies been trading Morgan Stanley (NYSE:MS)?
Heading into 2013, a total of 49 of the hedge funds we track held long positions in this stock, a change of -6% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes substantially.
According to our comprehensive database, Eagle Capital Management, managed by Boykin Curry, holds the most valuable position in Morgan Stanley (NYSE:MS). Eagle Capital Management has a $532.1 million position in the stock, comprising 3.8% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which held a $287.6 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Ken Heebner’s Capital Growth Management, Richard S. Pzena’s Pzena Investment Management and Dan Loeb’s Third Point.
Since Morgan Stanley (NYSE:MS) has faced a declination in interest from the smart money, it’s safe to say that there was a specific group of fund managers that elected to cut their entire stakes heading into 2013. Intriguingly, Jonathon Jacobson’s Highfields Capital Management dumped the largest investment of the 450+ funds we key on, valued at close to $83.7 million in stock.. Richard Perry’s fund, Perry Capital, also said goodbye to its stock, about $75.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds heading into 2013.
Insider trading activity in Morgan Stanley (NYSE:MS)
Insider purchases made by high-level executives is most useful when the company in question has seen transactions within the past six months. Over the last six-month time period, Morgan Stanley (NYSE:MS) has seen zero unique insiders buying, and 4 insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Morgan Stanley (NYSE:MS). These stocks are LPL Financial Holdings Inc (NASDAQ:LPLA), TD Ameritrade Holding Corp. (NYSE:AMTD), CME Group Inc (NASDAQ:CME), Charles Schwab Corp (NYSE:SCHW), and Nomura Holdings, Inc. (ADR) (NYSE:NMR). This group of stocks are the members of the investment brokerage – national industry and their market caps are similar to MS’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| LPL Financial Holdings Inc (NASDAQ:LPLA) | 12 | 0 | 4 |
| TD Ameritrade Holding Corp. (NYSE:AMTD) | 13 | 2 | 6 |
| CME Group Inc (NASDAQ:CME) | 31 | 0 | 8 |
| Charles Schwab Corp (NYSE:SCHW) | 27 | 0 | 5 |
| Nomura Holdings, Inc. (ADR) (NYSE:NMR) | 5 | 0 | 0 |
With the results shown by Insider Monkey’s time-tested strategies, everyday investors must always pay attention to hedge fund and insider trading sentiment, and Morgan Stanley (NYSE:MS) is an important part of this process.
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