Do Hedge Funds and Insiders Love Canadian Pacific Railway Limited (USA) (CP)?

Canadian Pacific Railway Limited (USA) (NYSE:CP) was in 31 hedge funds’ portfolio at the end of March. CP shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 33 hedge funds in our database with CP positions at the end of the previous quarter.

If you’d ask most investors, hedge funds are seen as slow, outdated investment tools of years past. While there are greater than 8000 funds in operation today, we at Insider Monkey hone in on the upper echelon of this club, about 450 funds. It is estimated that this group controls the lion’s share of the smart money’s total capital, and by keeping an eye on their best picks, we have found a few investment strategies that have historically beaten Mr. Market. 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 topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as integral, positive insider trading activity is another way to break down the marketplace. Just as you’d expect, there are lots of incentives for a bullish insider to cut shares of his or her company, but only one, very clear reason why they would buy. Many empirical studies have demonstrated the useful potential of this tactic if “monkeys” understand what to do (learn more here).

With these “truths” under our belt, it’s important to take a gander at the recent action regarding Canadian Pacific Railway Limited (USA) (NYSE:CP).

Hedge fund activity in Canadian Pacific Railway Limited (USA) (NYSE:CP)

At Q1’s end, a total of 31 of the hedge funds we track were long in this stock, a change of -6% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes significantly.

When looking at the hedgies we track, Pershing Square, managed by Bill Ackman, holds the biggest position in Canadian Pacific Railway Limited (USA) (NYSE:CP). Pershing Square has a $3.1521 billion position in the stock, comprising 31.3% of its 13F portfolio. The second largest stake is held by Daniel S. Och of OZ Management, with a $481.5 million position; 1.8% of its 13F portfolio is allocated to the stock. Remaining hedgies with similar optimism include Donald Chiboucis’s Columbus Circle Investors, James Dinan’s York Capital Management and David Stemerman’s Conatus Capital Management.

Judging by the fact that Canadian Pacific Railway Limited (USA) (NYSE:CP) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies that elected to cut their full holdings at the end of the first quarter. Interestingly, Bain Capital’s Brookside Capital said goodbye to the largest position of the 450+ funds we track, totaling about $102.8 million in stock.. Jim Simons’s fund, Renaissance Technologies, also said goodbye to its stock, about $15.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds at the end of the first quarter.

How have insiders been trading Canadian Pacific Railway Limited (USA) (NYSE:CP)?

Insider trading activity, especially when it’s bullish, is most useful when the company we’re looking at has seen transactions within the past 180 days. Over the last half-year time period, Canadian Pacific Railway Limited (USA) (NYSE:CP) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Canadian Pacific Railway Limited (USA) (NYSE:CP). These stocks are Union Pacific Corporation (NYSE:UNP), Canadian National Railway (USA) (NYSE:CNI), Kansas City Southern (NYSE:KSU), Norfolk Southern Corp. (NYSE:NSC), and CSX Corporation (NYSE:CSX). This group of stocks are in the railroads industry and their market caps resemble CP’s market cap.

With the returns exhibited by the aforementioned tactics, everyday investors should always keep an eye on hedge fund and insider trading sentiment, and Canadian Pacific Railway Limited (USA) (NYSE:CP) shareholders fit into this picture quite nicely.

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