Alcoa Inc (AA): Hedge Funds Are Bearish and Insiders Are Bullish, What Should You Do?

Alcoa Inc (NYSE:AA) shareholders have witnessed a decrease in enthusiasm from smart money lately.

According to most traders, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are over 8000 funds trading at the moment, we look at the masters of this group, about 450 funds. It is estimated that this group controls the majority of the smart money’s total asset base, and by keeping an eye on their best investments, we have unearthed a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outpaced 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 topped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as integral, optimistic insider trading sentiment is a second way to break down the investments you’re interested in. There are many stimuli for an upper level exec to sell shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the useful potential of this method if investors understand where to look (learn more here).

Consequently, let’s take a peek at the key action encompassing Alcoa Inc (NYSE:AA).

What does the smart money think about Alcoa Inc (NYSE:AA)?

At Q1’s end, a total of 21 of the hedge funds we track held long positions in this stock, a change of -5% from the first quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably.

When looking at the hedgies we track, William B. Gray’s Orbis Investment Management had the largest position in Alcoa Inc (NYSE:AA), worth close to $35.5 million, comprising 0.3% of its total 13F portfolio. Coming in second is Ron Gutfleish of Elm Ridge Capital, with a $26.5 million position; 3% of its 13F portfolio is allocated to the company. Some other hedgies that are bullish include Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and Mario Gabelli’s GAMCO Investors.

Due to the fact that Alcoa Inc (NYSE:AA) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of funds who sold off their entire stakes last quarter. Interestingly, Jim Simons’s Renaissance Technologies cut the biggest investment of the “upper crust” of funds we monitor, valued at an estimated $18 million in stock.. D. E. Shaw’s fund, D E Shaw, also dropped its call options., about $11.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.

How have insiders been trading Alcoa Inc (NYSE:AA)?

Insider buying is particularly usable when the company we’re looking at has seen transactions within the past six months. Over the last six-month time period, Alcoa Inc (NYSE:AA) has seen 2 unique insiders buying, and 1 insider sales (see the details of insider trades here).

With the returns demonstrated by the aforementioned strategies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Alcoa Inc (NYSE:AA) applies perfectly to this mantra.

Click here to learn why you should track hedge funds