Hedge Funds Are Selling Ericsson (ADR) (ERIC)

Is Ericsson (ADR) (NASDAQ:ERIC) a good investment?

If you were to ask many of your fellow readers, hedge funds are seen as overrated, old investment tools of a period lost to current times. Although there are In excess of 8,000 hedge funds trading currently, Insider Monkey looks at the leaders of this group, close to 525 funds. Analysts calculate that this group oversees the majority of the smart money’s total capital, and by paying attention to their highest quality stock picks, we’ve spotted a number of investment strategies that have historically beaten the S&P 500. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 33 percentage points in 11 months (find the details here).

Equally as key, optimistic insider trading sentiment is another way to look at the investments you’re interested in. As the old adage goes: there are many stimuli for an executive to sell shares of his or her company, but just one, very clear reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the market-beating potential of this method if you understand what to do (learn more here).

Furthermore, let’s discuss the newest info about Ericsson (ADR) (NASDAQ:ERIC).

Hedge fund activity in Ericsson (ADR) (NASDAQ:ERIC)

At Q2’s end, a total of 14 of the hedge funds we track were long in this stock, a change of -13% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially.

When using filings from the hedgies we track, Valinor Management LLC, managed by David Gallo, holds the largest position in Ericsson (ADR) (NASDAQ:ERIC). Valinor Management LLC has a $53.3 million position in the stock, comprising 2.2% of its 13F portfolio. On Valinor Management LLC’s heels is Jim Simons of Renaissance Technologies, with a $24.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Patrik Brummer’s Zenit Asset Management AB.

Judging by the fact that Ericsson (ADR) (NASDAQ:ERIC) has faced bearish sentiment from upper-tier hedge fund managers, it’s safe to say that there exists a select few hedge funds that decided to sell off their positions entirely in Q1. At the top of the heap, Peter Rathjens Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest stake of all the hedgies we monitor, worth close to $31.8 million in stock, and Lee Ainslie of Maverick Capital was right behind this move, as the fund sold off about $23.7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds in Q1.

What have insiders been doing with Ericsson (ADR) (NASDAQ:ERIC)?

Bullish insider trading is best served when the company in focus has seen transactions within the past 180 days. Over the latest six-month time period, Ericsson (ADR) (NASDAQ:ERIC) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Ericsson (ADR) (NASDAQ:ERIC). These stocks are Echostar Corporation (NASDAQ:SATS), Harris Corporation (NYSE:HRS), Nokia Corporation (ADR) (NYSE:NOK), QUALCOMM, Inc. (NASDAQ:QCOM), and Motorola Solutions Inc (NYSE:MSI). This group of stocks are the members of the communication equipment industry and their market caps are closest to ERIC’s market cap.

Using the results demonstrated by the previously mentioned tactics, regular investors must always watch hedge fund and insider trading sentiment, and Ericsson (ADR) (NASDAQ:ERIC) applies perfectly to this mantra.

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