Hedge Funds Are Betting On Tower Group International Ltd (TWGP)

Tower Group International Ltd (NASDAQ:TWGP) was in 20 hedge funds’ portfolio at the end of March. TWGP investors should pay attention to an increase in hedge fund interest lately. There were 9 hedge funds in our database with TWGP positions at the end of the previous quarter.

To most traders, hedge funds are assumed to be unimportant, outdated investment tools of years past. While there are greater than 8000 funds trading today, we choose to focus on the aristocrats of this club, close to 450 funds. It is estimated that this group controls the lion’s share of the hedge fund industry’s total capital, and by paying attention to their top picks, we have figured out a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as beneficial, positive insider trading activity is another way to parse down the world of equities. There are plenty of motivations for an upper level exec to downsize shares of his or her company, but only one, very simple reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this method if investors know where to look (learn more here).

With these “truths” under our belt, it’s important to take a peek at the latest action regarding Tower Group International Ltd (NASDAQ:TWGP).

What does the smart money think about Tower Group International Ltd (NASDAQ:TWGP)?

Heading into Q2, a total of 20 of the hedge funds we track were bullish in this stock, a change of 122% from one quarter earlier. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully.

Of the funds we track, Michael A. Price and Amos Meron’s Empyrean Capital Partners had the biggest position in Tower Group International Ltd (NASDAQ:TWGP), worth close to $44.3 million, comprising 0.9% of its total 13F portfolio. The second largest stake is held by Youlia Miteva of Proxima Capital Management, with a $19.4 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Ken Gray and Steve Walsh’s Bryn Mawr Capital, Steven Cohen’s SAC Capital Advisors and Chuck Royce’s Royce & Associates.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, assembled the largest position in Tower Group International Ltd (NASDAQ:TWGP). Empyrean Capital Partners had 44.3 million invested in the company at the end of the quarter. Youlia Miteva’s Proxima Capital Management also made a $19.4 million investment in the stock during the quarter. The other funds with brand new TWGP positions are Ken Gray and Steve Walsh’s Bryn Mawr Capital, Steven Cohen’s SAC Capital Advisors, and Chuck Royce’s Royce & Associates.

What have insiders been doing with Tower Group International Ltd (NASDAQ:TWGP)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in focus has experienced transactions within the past 180 days. Over the latest half-year time period, Tower Group International Ltd (NASDAQ:TWGP) has experienced 1 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Tower Group International Ltd (NASDAQ:TWGP). These stocks are Greenlight Capital Re, Ltd. (NASDAQ:GLRE), FBL Financial Group (NYSE:FFG), MGIC Investment Corp. (NYSE:MTG), Argo Group International Holdings, Ltd. (NASDAQ:AGII), and Hilltop Holdings Inc. (NYSE:HTH). All of these stocks are in the property & casualty insurance industry and their market caps are closest to TWGP’s market cap.

With the returns shown by the aforementioned studies, retail investors must always monitor hedge fund and insider trading activity, and Tower Group International Ltd (NASDAQ:TWGP) is an important part of this process.

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