Bank of America Corp (NYSE:BAC) investors should pay attention to a decrease in hedge fund interest in recent months.
In the eyes of most investors, hedge funds are perceived as slow, outdated investment tools of yesteryear. While there are over 8000 funds with their doors open at present, we at Insider Monkey choose to focus on the upper echelon of this club, around 450 funds. Most estimates calculate that this group has its hands on the majority of the hedge fund industry’s total asset base, and by keeping an eye on their top picks, we have discovered a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per 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 outperformed the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).
Equally as important, bullish insider trading sentiment is another way to break down the stock market universe. Just as you’d expect, there are a variety of stimuli for a bullish insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Various empirical studies have demonstrated the market-beating potential of this strategy if “monkeys” know where to look (learn more here).
Consequently, we’re going to take a peek at the key action surrounding Bank of America Corp (NYSE:BAC).
How are hedge funds trading Bank of America Corp (NYSE:BAC)?
At the end of Q1, a total of 93 of the hedge funds we track were long in this stock, a change of -8% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially.
When looking at the hedgies we track, Bruce Berkowitz’s Fairholme (FAIRX) had the largest position in Bank of America Corp (NYSE:BAC), worth close to $1.2252 billion, comprising 15.6% of its total 13F portfolio. On Fairholme (FAIRX)’s heels is Paul Ruddock and Steve Heinz of Lansdowne Partners, with a $465.4 million position; the fund has 6.4% of its 13F portfolio invested in the stock. Other hedge funds that are bullish include Kerr Neilson’s Platinum Asset Management, Richard S. Pzena’s Pzena Investment Management and Phill Gross and Robert Atchinson’s Adage Capital Management.
Since Bank of America Corp (NYSE:BAC) has experienced falling interest from hedge fund managers, it’s safe to say that there were a few funds that slashed their positions entirely at the end of the year. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the largest stake of the 450+ funds we track, valued at an estimated $174.7 million in stock., and Ken Heebner of Capital Growth Management was right behind this move, as the fund sold off about $152.1 million worth. These transactions are important to note, as total hedge fund interest fell by 8 funds at the end of the year.
Insider trading activity in Bank of America Corp (NYSE:BAC)
Insider purchases made by high-level executives is at its handiest when the primary stock in question has seen transactions within the past six months. Over the latest 180-day time period, Bank of America Corp (NYSE:BAC) has seen 1 unique insiders buying, 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 Bank of America Corp (NYSE:BAC). These stocks are Toronto-Dominion Bank (USA) (NYSE:TD), Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU), Wells Fargo & Co (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C). This group of stocks are the members of the money center banks industry and their market caps are similar to BAC’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Toronto-Dominion Bank (USA) (NYSE:TD) | 10 | 0 | 0 |
| Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU) | 8 | 0 | 0 |
| Wells Fargo & Co (NYSE:WFC) | 78 | 0 | 7 |
| JPMorgan Chase & Co. (NYSE:JPM) | 94 | 2 | 7 |
| Citigroup Inc. (NYSE:C) | 118 | 2 | 0 |
With the returns demonstrated by the aforementioned tactics, everyday investors should always monitor hedge fund and insider trading sentiment, and Bank of America Corp (NYSE:BAC) is an important part of this process.
