Hedge Funds Are Dumping Telefonica S.A. (ADR) (TEF)

Telefonica S.A. (ADR) (NYSE:TEF) was in 5 hedge funds’ portfolio at the end of the fourth quarter of 2012. TEF has experienced a decrease in activity from the world’s largest hedge funds of late. There were 6 hedge funds in our database with TEF holdings at the end of the previous quarter.

According to most investors, hedge funds are viewed as unimportant, outdated financial tools of years past. While there are greater than 8000 funds with their doors open at the moment, we at Insider Monkey choose to focus on the elite of this group, around 450 funds. It is estimated that this group has its hands on the majority of the smart money’s total asset base, and by monitoring their best investments, we have figured out a few investment strategies that have historically outstripped the 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 24 percentage points in 7 months (check out a sample of our picks).

Just as integral, positive insider trading sentiment is a second way to parse down the investments you’re interested in. Obviously, there are lots of motivations for a bullish insider to drop shares of his or her company, but just one, very simple reason why they would buy. Many empirical studies have demonstrated the valuable potential of this tactic if you understand where to look (learn more here).

Now, we’re going to take a look at the recent action regarding Telefonica S.A. (ADR) (NYSE:TEF).

What does the smart money think about Telefonica S.A. (ADR) (NYSE:TEF)?

In preparation for this year, a total of 5 of the hedge funds we track held long positions in this stock, a change of -17% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, Dreman Value Management, managed by David Dreman, holds the largest position in Telefonica S.A. (ADR) (NYSE:TEF). Dreman Value Management has a $4.9 million position in the stock, comprising 0.1% of its 13F portfolio. On Dreman Value Management’s heels is Two Sigma Advisors, managed by John Overdeck and David Siegel, which held a $2.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Jim Simons’s Renaissance Technologies, Mario Gabelli’s GAMCO Investors and Steven Cohen’s SAC Capital Advisors.

Since Telefonica S.A. (ADR) (NYSE:TEF) has faced a declination in interest from hedge fund managers, it’s safe to say that there was a specific group of money managers that slashed their positions entirely in Q4. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dropped the biggest stake of all the hedgies we monitor, valued at about $1.4 million in stock. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds in Q4.

How have insiders been trading Telefonica S.A. (ADR) (NYSE:TEF)?

Insider buying is best served when the primary stock in question has seen transactions within the past half-year. Over the last half-year time period, Telefonica S.A. (ADR) (NYSE:TEF) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Telefonica S.A. (ADR) (NYSE:TEF). These stocks are France Telecom SA (ADR) (NYSE:FTE), BT Group plc (ADR) (NYSE:BT), China Telecom Corporation Limited (ADR) (NYSE:CHA), Nippon Telegraph & Telephone Corp (ADR) (NYSE:NTT), and NTT Docomo Inc (ADR) (NYSE:DCM). This group of stocks are in the telecom services – foreign industry and their market caps match TEF’s market cap.

With the returns shown by the aforementioned time-tested strategies, retail investors should always keep an eye on hedge fund and insider trading activity, and Telefonica S.A. (ADR) (NYSE:TEF) shareholders fit into this picture quite nicely.

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