Century Aluminum Co (CENX): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Century Aluminum Co (NASDAQ:CENX) was in 9 hedge funds’ portfolio at the end of March. CENX has experienced an increase in activity from the world’s largest hedge funds lately. There were 8 hedge funds in our database with CENX holdings at the end of the previous quarter.

If you’d ask most market participants, hedge funds are seen as slow, outdated investment vehicles of the past. While there are over 8000 funds with their doors open today, we look at the elite of this club, close to 450 funds. It is widely believed that this group has its hands on the majority of the hedge fund industry’s total asset base, and by paying attention to their top investments, we have revealed a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum 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 outpaced the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as important, optimistic insider trading activity is another way to parse down the financial markets. There are plenty of incentives for an insider to downsize shares of his or her company, but only one, very clear reason why they would behave bullishly. Several empirical studies have demonstrated the useful potential of this method if piggybackers understand where to look (learn more here).

Keeping this in mind, let’s take a gander at the latest action encompassing Century Aluminum Co (NASDAQ:CENX).

How are hedge funds trading Century Aluminum Co (NASDAQ:CENX)?

In preparation for this quarter, a total of 9 of the hedge funds we track held long positions in this stock, a change of 13% from the first quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully.

Of the funds we track, Impala Asset Management, managed by Robert Bishop, holds the largest position in Century Aluminum Co (NASDAQ:CENX). Impala Asset Management has a $28.1 million position in the stock, comprising 1.5% of its 13F portfolio. On Impala Asset Management’s heels is Chuck Royce of Royce & Associates, with a $12.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedgies that are bullish include Cliff Asness’s AQR Capital Management, Mario Gabelli’s GAMCO Investors and Israel Englander’s Millennium Management.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Impala Asset Management, managed by Robert Bishop, assembled the biggest position in Century Aluminum Co (NASDAQ:CENX). Impala Asset Management had 28.1 million invested in the company at the end of the quarter. Robert Bishop’s Impala Asset Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Ken Gray and Steve Walsh’s Bryn Mawr Capital, and Matthew Tewksbury’s Stevens Capital Management.

What do corporate executives and insiders think about Century Aluminum Co (NASDAQ:CENX)?

Insider purchases made by high-level executives is most useful when the company in focus has seen transactions within the past six months. Over the last 180-day time period, Century Aluminum Co (NASDAQ:CENX) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Century Aluminum Co (NASDAQ:CENX). These stocks are Alcoa Inc (NYSE:AA), Aluminum Corp. of China Limited (ADR) (NYSE:ACH), Alumina Limited (ADR) (NYSE:AWC), Noranda Aluminum Holding Corporation (NYSE:NOR), and Kaiser Aluminum Corp. (NASDAQ:KALU). All of these stocks are in the aluminum industry and their market caps are similar to CENX’s market cap.

With the returns shown by the aforementioned research, everyday investors should always keep an eye on hedge fund and insider trading sentiment, and Century Aluminum Co (NASDAQ:CENX) is an important part of this process.

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