Hedge Funds Are Dumping eBay Inc (EBAY)

eBay Inc (NASDAQ:EBAY) has experienced a decrease in hedge fund sentiment in recent months.

In the eyes of most market participants, hedge funds are viewed as worthless, outdated financial tools of the past. While there are over 8000 funds in operation at the moment, we hone in on the elite of this club, around 450 funds. It is widely believed that this group oversees the majority of all hedge funds’ total asset base, and by keeping an eye on their top investments, we have brought to light a few investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 outpaced the S&P 500 index by 24 percentage points in 7 months (see the details here).

Just as integral, bullish insider trading activity is a second way to parse down the stock market universe. Just as you’d expect, there are lots of incentives for an upper level exec to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this strategy if investors understand what to do (learn more here).

Keeping this in mind, it’s important to take a peek at the latest action encompassing eBay Inc (NASDAQ:EBAY).

How have hedgies been trading eBay Inc (NASDAQ:EBAY)?

At the end of the first quarter, a total of 89 of the hedge funds we track were bullish in this stock, a change of -3% from one quarter earlier. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes significantly.

When looking at the hedgies we track, Lone Pine Capital, managed by Stephen Mandel, holds the biggest position in eBay Inc (NASDAQ:EBAY). Lone Pine Capital has a $528.1 million position in the stock, comprising 2.7% of its 13F portfolio. The second largest stake is held by Donald Chiboucis of Columbus Circle Investors, with a $221.1 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Eric Mindich’s Eton Park Capital, Panayotis Takis Sparaggis’s Alkeon Capital Management and Rob Citrone’s Discovery Capital Management.

Because eBay Inc (NASDAQ:EBAY) has experienced bearish sentiment from the smart money, it’s safe to say that there is a sect of hedgies who sold off their entire stakes at the end of the year. Intriguingly, Patrick McCormack’s Tiger Consumer Management cut the largest stake of all the hedgies we track, totaling close to $89.1 million in stock., and John Thaler of JAT Capital Management was right behind this move, as the fund cut about $73.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds at the end of the year.

How are insiders trading eBay Inc (NASDAQ:EBAY)?

Insider purchases made by high-level executives is most useful when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time period, eBay Inc (NASDAQ:EBAY) has experienced zero unique insiders purchasing, and 12 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to eBay Inc (NASDAQ:EBAY). These stocks are PC Connection, Inc. (NASDAQ:PCCC), Liquidity Services, Inc. (NASDAQ:LQDT), Mercadolibre Inc (NASDAQ:MELI), Liberty Interactive (Interactive group) (NASDAQ:LINTA), and Amazon.com, Inc. (NASDAQ:AMZN). All of these stocks are in the catalog & mail order houses industry and their market caps are closest to EBAY’s market cap.