Do Hedge Funds and Insiders Love Giant Interactive Group Inc (ADR) (GA)?

Is Giant Interactive Group Inc (ADR) (NYSE:GA) a splendid investment now? The smart money is in a pessimistic mood. The number of bullish hedge fund positions retreated by 4 recently.

To most investors, hedge funds are viewed as slow, outdated investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, we look at the moguls of this group, around 450 funds. It is estimated that this group oversees the majority of the hedge fund industry’s total asset base, and by keeping an eye on their highest performing equity investments, we have brought to light a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as integral, bullish insider trading sentiment is a second way to parse down the stock market universe. There are plenty of motivations for an executive to cut shares of his or her company, but only one, very simple reason why they would buy. Many empirical studies have demonstrated the impressive potential of this tactic if investors understand what to do (learn more here).

With these “truths” under our belt, we’re going to take a gander at the latest action regarding Giant Interactive Group Inc (ADR) (NYSE:GA).

How are hedge funds trading Giant Interactive Group Inc (ADR) (NYSE:GA)?

At Q1’s end, a total of 12 of the hedge funds we track were long in this stock, a change of -25% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully.

Of the funds we track, Cascabel Management, managed by Scott Sinclair and Laurence Chang, holds the biggest position in Giant Interactive Group Inc (ADR) (NYSE:GA). Cascabel Management has a $20.5 million position in the stock, comprising 7% of its 13F portfolio. Sitting at the No. 2 spot is Alex Sacerdote of Whale Rock Capital Management, with a $11.2 million position; 2.6% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Ken Griffin’s Citadel Investment Group, Jim Simons’s Renaissance Technologies and Robert B. Gillam’s McKinley Capital Management.

Since Giant Interactive Group Inc (ADR) (NYSE:GA) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers who sold off their positions entirely at the end of the first quarter. Interestingly, D. E. Shaw’s D E Shaw said goodbye to the biggest position of the 450+ funds we monitor, comprising close to $1.9 million in stock., and John Hurley of Cavalry Asset Management was right behind this move, as the fund sold off about $1.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds at the end of the first quarter.

What do corporate executives and insiders think about Giant Interactive Group Inc (ADR) (NYSE:GA)?

Insider buying is at its handiest when the company in focus has seen transactions within the past 180 days. Over the last half-year time frame, Giant Interactive Group Inc (ADR) (NYSE:GA) 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 Giant Interactive Group Inc (ADR) (NYSE:GA). These stocks are The Advisory Board Company (NASDAQ:ABCO), SYNNEX Corporation (NYSE:SNX), Healthcare Services Group, Inc. (NASDAQ:HCSG), Fair Isaac Corporation (NYSE:FICO), and Shutterstock Inc (NYSE:SSTK). All of these stocks are in the business services industry and their market caps are closest to GA’s market cap.

With the results shown by our time-tested strategies, retail investors should always monitor hedge fund and insider trading activity, and Giant Interactive Group Inc (ADR) (NYSE:GA) is an important part of this process.

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