To the average investor, there are many gauges investors can use to watch publicly traded companies. A pair of the most underrated are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the broader indices by a significant margin (see just how much).
Just as important, bullish insider trading activity is a second way to break down the financial markets. As the old adage goes: there are a variety of reasons for an executive to sell shares of his or her company, but just one, very clear reason why they would buy. Many academic studies have demonstrated the impressive potential of this tactic if piggybackers understand where to look (learn more here).
Now, let’s take a look at the recent action encompassing Colony Financial Inc (NYSE:CLNY).
How are hedge funds trading Colony Financial Inc (NYSE:CLNY)?
Heading into 2013, a total of 16 of the hedge funds we track were long in this stock, a change of -6% from the third quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings considerably.
Of the funds we track, SAB Capital Management, managed by Brian Jackelow, holds the most valuable position in Colony Financial Inc (NYSE:CLNY). SAB Capital Management has a $76 million position in the stock, comprising 11.1% of its 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $34 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Scott Scher & Michael Prober’s Clovis Capital Management, Steven Cohen’s SAC Capital Advisors and Brian Taylor’s Pine River Capital Management.
Due to the fact that Colony Financial Inc (NYSE:CLNY) has faced falling interest from hedge fund managers, it’s safe to say that there is a sect of hedgies who were dropping their full holdings in Q4. At the top of the heap, Malcolm Fairbairn’s Ascend Capital sold off the largest stake of all the hedgies we monitor, comprising about $4 million in stock.. D. E. Shaw’s fund, D E Shaw, also dumped its stock, about $4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds in Q4.
How have insiders been trading Colony Financial Inc (NYSE:CLNY)?
Insider trading activity, especially when it’s bullish, is most useful when the company we’re looking at has experienced transactions within the past six months. Over the last 180-day time period, Colony Financial Inc (NYSE:CLNY) has experienced zero unique insiders buying, and 6 insider sales (see the details of insider trades here).
With the results shown by the aforementioned time-tested strategies, retail investors must always watch hedge fund and insider trading activity, and Colony Financial Inc (NYSE:CLNY) applies perfectly to this mantra.
Click here to learn more about Insider Monkey’s Hedge Fund Newsletter
Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.
