To most shareholders, hedge funds are perceived as worthless, outdated financial vehicles of years past. While there are greater than 8000 funds in operation at present, we at Insider Monkey look at the aristocrats of this group, about 450 funds. Most estimates calculate that this group controls the majority of the smart money’s total capital, and by monitoring their highest performing equity investments, we have unsheathed a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually 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 25 percentage points in 6.5 month (see the details here).
Equally as beneficial, bullish insider trading sentiment is a second way to break down the financial markets. Just as you’d expect, there are a variety of stimuli for an upper level exec to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Various empirical studies have demonstrated the valuable potential of this strategy if shareholders understand where to look (learn more here).
With these “truths” under our belt, it’s important to take a gander at the recent action regarding Esterline Technologies Corporation (NYSE:ESL).
What have hedge funds been doing with Esterline Technologies Corporation (NYSE:ESL)?
Heading into 2013, a total of 17 of the hedge funds we track held long positions in this stock, a change of 0% from the third quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully.
When looking at the hedgies we track, Ralph V. Whitworth’s Relational Investors had the most valuable position in Esterline Technologies Corporation (NYSE:ESL), worth close to $149 million, accounting for 2.8% of its total 13F portfolio. Coming in second is Clifton S. Robbins of Blue Harbour Group, with a $31 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include David Dreman’s Dreman Value Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Jim Simons’s Renaissance Technologies.
Seeing as Esterline Technologies Corporation (NYSE:ESL) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedgies who were dropping their full holdings in Q4. Intriguingly, Ken Fisher’s Fisher Asset Management dumped the biggest investment of the 450+ funds we track, worth close to $28 million in stock., and Louis Bacon of Moore Global Investments was right behind this move, as the fund cut about $7 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
How have insiders been trading Esterline Technologies Corporation (NYSE:ESL)?
Insider buying is most useful when the company we’re looking at has seen transactions within the past 180 days. Over the last 180-day time period, Esterline Technologies Corporation (NYSE:ESL) has experienced 6 unique insiders purchasing, and 7 insider sales (see the details of insider trades here).
With the returns shown by Insider Monkey’s tactics, everyday investors should always keep an eye on hedge fund and insider trading activity, and Esterline Technologies Corporation (NYSE:ESL) shareholders fit into this picture quite nicely.
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.
