Should You Avoid Pepco Holdings, Inc. (POM)?

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Pepco Holdings, Inc. (NYSE:POM) was in 6 hedge funds’ portfolio at the end of the first quarter of 2013. POM shareholders have witnessed a decrease in support from the world’s most elite money managers recently. There were 7 hedge funds in our database with POM holdings at the end of the previous quarter.

In the financial world, there are a multitude of metrics investors can use to analyze their holdings. A pair of the most innovative are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the best fund managers can outperform the market by a significant amount (see just how much).

David Shaw

Just as important, bullish insider trading activity is a second way to parse down the stock market universe. There are plenty of stimuli for an insider to cut shares of his or her company, but only one, very clear reason why they would behave bullishly. Many academic studies have demonstrated the valuable potential of this method if you know where to look (learn more here).

With all of this in mind, it’s important to take a peek at the recent action encompassing Pepco Holdings, Inc. (NYSE:POM).

What have hedge funds been doing with Pepco Holdings, Inc. (NYSE:POM)?

At the end of the first quarter, a total of 6 of the hedge funds we track were bullish in this stock, a change of -14% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly.

According to our comprehensive database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital had the most valuable position in Pepco Holdings, Inc. (NYSE:POM), worth close to $6.6 million, comprising 0.1% of its total 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which held a $5.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds with similar optimism include Jim Simons’s Renaissance Technologies, and John A. Levin’s Levin Capital Strategies.

Seeing as Pepco Holdings, Inc. (NYSE:POM) has witnessed bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of fund managers that elected to cut their positions entirely heading into Q2. Interestingly, Dmitry Balyasny’s Balyasny Asset Management sold off the biggest investment of the “upper crust” of funds we watch, valued at about $5.7 million in stock.. Jacob Gottlieb’s fund, Visium Asset Management, also cut its stock, about $2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q2.

How are insiders trading Pepco Holdings, Inc. (NYSE:POM)?

Insider trading activity, especially when it’s bullish, is most useful when the company we’re looking at has experienced transactions within the past 180 days. Over the latest six-month time period, Pepco Holdings, Inc. (NYSE:POM) has experienced zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Pepco Holdings, Inc. (NYSE:POM). These stocks are Companhia Paranaense de Energia (ADR) (NYSE:ELP), Alliant Energy Corporation (NYSE:LNT), Brookfield Infrastructure Partners L.P. (NYSE:BIP), Centrais Eletricas Brasileiras SA (ADR) (NYSE:EBR), and ITC Holdings Corp. (NYSE:ITC). This group of stocks are in the electric utilities industry and their market caps resemble POM’s market cap.

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