AOL, Inc. (AOL): Are Hedge Funds Right About This Stock?

AOL, Inc. (NYSE:AOL) was in 22 hedge funds’ portfolio at the end of the first quarter of 2013. AOL investors should pay attention to an increase in hedge fund interest lately. There were 21 hedge funds in our database with AOL positions at the end of the previous quarter.

To the average investor, there are dozens of gauges market participants can use to monitor stocks. A pair of the most useful 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 investment managers can outpace the market by a healthy margin (see just how much).

Equally as important, bullish insider trading sentiment is another way to break down the marketplace. As the old adage goes: there are a number of stimuli for an executive to get rid of shares of his or her company, but only one, very clear reason why they would behave bullishly. Various academic studies have demonstrated the valuable potential of this tactic if investors understand where to look (learn more here).

Keeping this in mind, it’s important to take a glance at the latest action encompassing AOL, Inc. (NYSE:AOL).

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

At Q1’s end, a total of 22 of the hedge funds we track held long positions in this stock, a change of 5% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably.

According to our comprehensive database, David Cohen and Harold Levy’s Iridian Asset Management had the most valuable position in AOL, Inc. (NYSE:AOL), worth close to $133.2 million, comprising 2% of its total 13F portfolio. On Iridian Asset Management’s heels is D E Shaw, managed by D. E. Shaw, which held a $88.6 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedge funds with similar optimism include Donald Chiboucis’s Columbus Circle Investors, Jim Simons’s Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

As one would reasonably expect, key money managers have jumped into AOL, Inc. (NYSE:AOL) headfirst. Columbus Circle Investors, managed by Donald Chiboucis, assembled the most outsized position in AOL, Inc. (NYSE:AOL). Columbus Circle Investors had 88.4 million invested in the company at the end of the quarter. Mark Kingdon’s Kingdon Capital also made a $14 million investment in the stock during the quarter. The other funds with brand new AOL positions are John Wu’s Sureview Capital, Seymour Sy Kaufman and Michael Stark’s Crosslink Capital, and James Dondero’s Highland Capital Management.

What have insiders been doing with AOL, Inc. (NYSE:AOL)?

Insider purchases made by high-level executives is most useful when the company we’re looking at has seen transactions within the past half-year. Over the latest six-month time frame, AOL, Inc. (NYSE:AOL) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to AOL, Inc. (NYSE:AOL). These stocks are ValueClick Inc (NASDAQ:VCLK), IAC/InterActiveCorp (NASDAQ:IACI), Zynga Inc (NASDAQ:ZNGA), HomeAway, Inc. (NASDAQ:AWAY), and Youku Tudou Inc (ADR) (NYSE:YOKU). All of these stocks are in the internet information providers industry and their market caps match AOL’s market cap.