3M Co (NYSE:MMM) might be worth taking out of your portfolio; here’s why.
If you were to ask many of your fellow readers, hedge funds are perceived as bloated, old investment tools of a period lost to current times. Although there are more than 8,000 hedge funds trading currently, Insider Monkey aim at the upper echelon of this group, about 525 funds. Analysts calculate that this group oversees most of the hedge fund industry’s total capital, and by watching their highest performing stock picks, we’ve formulated a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat 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 outclassed the S&P 500 index by 33 percentage points in 11 months (find the details here).
Just as key, optimistic insider trading activity is another way to look at the world of equities. Just as you’d expect, there are plenty of stimuli for an upper level exec to downsize 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 shareholders know where to look (learn more here).
What’s more, it’s important to examine the recent info about 3M Co (NYSE:MMM).
Hedge fund activity in 3M Co (NYSE:MMM)
Heading into Q3, a total of 33 of the hedge funds we track were long in this stock, a change of -11% from the first quarter. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings substantially.
According to our 13F database, Matt McLennan’s First Eagle Investment Management had the most valuable position in 3M Co (NYSE:MMM), worth close to $643.6 million, accounting for 2% of its total 13F portfolio. The second largest stake is held by Edgar Wachenheim of Greenhaven Associates, with a $300.3 million position; the fund has 8% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include Boykin Curry’s Eagle Capital Management, Natixis Global Asset Management’s Harris Associates and Ric Dillon’s Diamond Hill Capital.
Judging by the fact that 3M Co (NYSE:MMM) has witnessed bearish sentiment from the top-tier hedge fund industry, we can see that there exists a select few money managers that decided to sell off their entire stakes in Q1. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management sold off the biggest stake of the 450+ funds we monitor, worth close to $20 million in stock, and Anand Parekh of Alyeska Investment Group was right behind this move, as the fund dropped about $15.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 4 funds in Q1.
What do corporate executives and insiders think about 3M Co (NYSE:MMM)?
Insider buying made by high-level executives is at its handiest when the company in question has seen transactions within the past six months. Over the last half-year time period, 3M Co (NYSE:MMM) has seen zero unique insiders purchasing, and 10 insider sales (see the details of insider trades here).
We’ll go over the relationship between both of these indicators in other stocks similar to 3M Co (NYSE:MMM). These stocks are Lydall, Inc. (NYSE:LDL), Steel Partners Holdings LP (NYSE:SPLP), Global Eagle Acquisition Corp (NASDAQ:ENT), Harbinger Group Inc (NYSE:HRG), and Mitsui & Co Ltd (ADR) (PINK:MITSY). This group of stocks belong to the conglomerates industry and their market caps match MMM’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Lydall, Inc. (NYSE:LDL) | 12 | 0 | 6 |
| Steel Partners Holdings LP (NYSE:SPLP) | 4 | 0 | 0 |
| Global Eagle Acquisition Corp (NASDAQ:ENT) | 6 | 0 | 1 |
| Harbinger Group Inc (NYSE:HRG) | 16 | 0 | 3 |
| Mitsui & Co Ltd (ADR) (PINK:MITSY) | 0 | 0 |
Using the returns explained by our tactics, average investors must always pay attention to hedge fund and insider trading sentiment, and 3M Co (NYSE:MMM) applies perfectly to this mantra.
