Should You Buy PNM Resources, Inc. (NYSE:PNM)? – MGE Energy, Inc. (NASDAQ:MGEE), Avista Corp (NYSE:AVA)

PNM Resources, Inc. (NYSE:PNM) has experienced an increase in support from the world’s most elite money managers recently.

In the eyes of most shareholders, hedge funds are seen as unimportant, outdated investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, we hone in on the crème de la crème of this club, close to 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total asset base, and by monitoring their top stock picks, we have brought to light a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year 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 outclassed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

PNM Resources, Inc. (NYSE:PNM)

Equally as beneficial, optimistic insider trading activity is a second way to break down the stock market universe. Obviously, there are many motivations for an upper level exec to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the market-beating potential of this tactic if shareholders understand what to do (learn more here).

Consequently, we’re going to take a look at the latest action regarding PNM Resources, Inc. (NYSE:PNM).

How have hedgies been trading PNM Resources, Inc. (NYSE:PNM)?

In preparation for this year, a total of 13 of the hedge funds we track were bullish in this stock, a change of 30% from the third quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully.

When looking at the hedgies we track, Mario Gabelli’s GAMCO Investors had the largest position in PNM Resources, Inc. (NYSE:PNM), worth close to $63 million, comprising 0.5% of its total 13F portfolio. Coming in second is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $15 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Chuck Royce’s Royce & Associates, Cliff Asness’s AQR Capital Management and Jim Simons’s Renaissance Technologies.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Ellington, managed by Mike Vranos, initiated the biggest position in PNM Resources, Inc. (NYSE:PNM). Ellington had 1 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $1 million investment in the stock during the quarter. The following funds were also among the new PNM investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors.

How have insiders been trading PNM Resources, Inc. (NYSE:PNM)?

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 180-day time frame, PNM Resources, Inc. (NYSE:PNM) has experienced zero unique insiders buying, and 6 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 PNM Resources, Inc. (NYSE:PNM). These stocks are Vectren Corporation (NYSE:VVC), MGE Energy, Inc. (NASDAQ:MGEE), NorthWestern Corp (NYSE:NWE), Avista Corp (NYSE:AVA), and ALLETE Inc (NYSE:ALE). This group of stocks belong to the diversified utilities industry and their market caps resemble PNM’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Vectren Corporation (NYSE:VVC) 9 0 0
MGE Energy, Inc. (NASDAQ:MGEE) 6 2 0
NorthWestern Corp (NYSE:NWE) 9 1 0
Avista Corp (NYSE:AVA) 10 0 5

With the returns exhibited by the aforementioned time-tested strategies, everyday investors should always watch hedge fund and insider trading activity, and PNM Resources, Inc. (NYSE:PNM) is no exception.