Do Hedge Funds and Insiders Love ALLETE Inc (ALE)?

ALLETE Inc (NYSE:ALE) has experienced a decrease in support from the world’s most elite money managers recently.

To most investors, hedge funds are seen as unimportant, outdated financial tools of the past. While there are over 8000 funds with their doors open today, we at Insider Monkey choose to focus on the crème de la crème of this club, about 450 funds. It is estimated that this group controls the lion’s share of the smart money’s total asset base, and by monitoring their best investments, we have determined a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a 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 23.3 percentage points in 8 months (check out a sample of our picks).

Just as important, bullish insider trading sentiment is a second way to parse down the marketplace. Just as you’d expect, there are plenty of motivations for an executive to drop 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 piggybackers know what to do (learn more here).

Now, it’s important to take a peek at the key action surrounding ALLETE Inc (NYSE:ALE).

What does the smart money think about ALLETE Inc (NYSE:ALE)?

Heading into Q2, a total of 6 of the hedge funds we track were long in this stock, a change of -25% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly.

According to our comprehensive database, Phill Gross and Robert Atchinson’s Adage Capital Management had the most valuable position in ALLETE Inc (NYSE:ALE), worth close to $61.3 million, accounting for 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Bernard Horn of Polaris Capital Management, with a $51.5 million position; the fund has 3% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Chuck Royce’s Royce & Associates, Mario Gabelli’s GAMCO Investors and Ken Griffin’s Citadel Investment Group.

Due to the fact that ALLETE Inc (NYSE:ALE) has witnessed a declination in interest from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers that slashed their entire stakes in Q1. At the top of the heap, D. E. Shaw’s D E Shaw dropped the biggest stake of the 450+ funds we key on, valued at close to $0.6 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dumped its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds in Q1.

What have insiders been doing with ALLETE Inc (NYSE:ALE)?

Insider buying is most useful when the company in question has seen transactions within the past six months. Over the last half-year time period, ALLETE Inc (NYSE:ALE) has experienced zero unique insiders purchasing, and 7 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to ALLETE Inc (NYSE:ALE). These stocks are MGE Energy, Inc. (NASDAQ:MGEE), Vectren Corporation (NYSE:VVC), NorthWestern Corp (NYSE:NWE), Avista Corp (NYSE:AVA), and PNM Resources, Inc. (NYSE:PNM). This group of stocks are the members of the diversified utilities industry and their market caps match ALE’s market cap.

With the returns exhibited by Insider Monkey’s strategies, everyday investors should always keep an eye on hedge fund and insider trading activity, and ALLETE Inc (NYSE:ALE) is no exception.

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