Hedge Funds Are Selling Erie Indemnity Company (ERIE)

Is Erie Indemnity Company (NASDAQ:ERIE) a superb investment today? Investors who are in the know are taking a pessimistic view. The number of bullish hedge fund bets retreated by 2 in recent months.

In the eyes of most stock holders, hedge funds are assumed to be unimportant, old financial tools of the past. While there are greater than 8000 funds in operation today, we choose to focus on the upper echelon of this club, around 450 funds. Most estimates calculate that this group controls most of the hedge fund industry’s total capital, and by watching their top picks, we have figured out a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually 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 23.3 percentage points in 8 months (explore the details and some picks here).

Just as key, optimistic insider trading activity is a second way to break down the stock market universe. As the old adage goes: there are a number of stimuli for a bullish insider to sell shares of his or her company, but just one, very clear reason why they would buy. Many empirical studies have demonstrated the impressive potential of this tactic if investors understand where to look (learn more here).

With all of this in mind, we’re going to take a peek at the latest action encompassing Erie Indemnity Company (NASDAQ:ERIE).

What does the smart money think about Erie Indemnity Company (NASDAQ:ERIE)?

In preparation for this quarter, a total of 7 of the hedge funds we track held long positions in this stock, a change of -22% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly.

According to our comprehensive database, Chuck Royce’s Royce & Associates had the biggest position in Erie Indemnity Company (NASDAQ:ERIE), worth close to $76.9 million, comprising 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which held a $9.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedgies that are bullish include Jim Simons’s Renaissance Technologies, Ken Griffin’s Citadel Investment Group and Joel Greenblatt’s Gotham Asset Management.

Judging by the fact that Erie Indemnity Company (NASDAQ:ERIE) has experienced falling interest from hedge fund managers, it’s safe to say that there is a sect of funds that decided to sell off their full holdings in Q1. Interestingly, Israel Englander’s Millennium Management cut the largest stake of the 450+ funds we monitor, totaling an estimated $1.1 million in stock.. Glenn Russell Dubin’s fund, Highbridge Capital Management, also said goodbye to its stock, about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds in Q1.

Insider trading activity in Erie Indemnity Company (NASDAQ:ERIE)

Insider buying is most useful when the primary stock in question has experienced transactions within the past half-year. Over the last half-year time period, Erie Indemnity Company (NASDAQ:ERIE) has experienced 1 unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Erie Indemnity Company (NASDAQ:ERIE). These stocks are Aon PLC (NYSE:AON), National Financial Partners Corp. (NYSE:NFP), Willis Group Holdings PLC (NYSE:WSH), Arthur J. Gallagher & Co. (NYSE:AJG), and Brown & Brown, Inc. (NYSE:BRO). This group of stocks are the members of the insurance brokers industry and their market caps match ERIE’s market cap.

With the returns demonstrated by our studies, everyday investors must always pay attention to hedge fund and insider trading activity, and Erie Indemnity Company (NASDAQ:ERIE) applies perfectly to this mantra.

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