Reynolds American, Inc. (NYSE:RAI) was in 17 hedge funds’ portfolio at the end of December. RAI investors should pay attention to a decrease in hedge fund interest lately. There were 20 hedge funds in our database with RAI positions at the end of the previous quarter.
To most investors, hedge funds are viewed as worthless, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey hone in on the upper echelon of this group, close to 450 funds. It is estimated that this group has its hands on most of the hedge fund industry’s total capital, and by keeping an eye on their best picks, we have deciphered a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outperformed 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 outperformed the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Equally as important, bullish 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 an executive to drop shares of his or her company, but only one, very clear reason why they would buy. Several academic studies have demonstrated the market-beating potential of this strategy if piggybackers understand where to look (learn more here).
Keeping this in mind, we’re going to take a glance at the latest action encompassing Reynolds American, Inc. (NYSE:RAI).
What does the smart money think about Reynolds American, Inc. (NYSE:RAI)?
Heading into 2013, a total of 17 of the hedge funds we track held long positions in this stock, a change of -15% from the third quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly.
Of the funds we track, David Winters’s Wintergreen Advisers had the most valuable position in Reynolds American, Inc. (NYSE:RAI), worth close to $61 million, comprising 8% of its total 13F portfolio. On Wintergreen Advisers’s heels is Jim Simons of Renaissance Technologies, with a $53 million position; 0% of its 13F portfolio is allocated to the stock. Other peers that are bullish include David Harding’s Winton Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Cliff Asness’s AQR Capital Management.
Judging by the fact that Reynolds American, Inc. (NYSE:RAI) has experienced bearish sentiment from the smart money, it’s safe to say that there was a specific group of fund managers who sold off their positions entirely in Q4. It’s worth mentioning that Charles Clough’s Clough Capital Partners dumped the largest stake of the “upper crust” of funds we key on, totaling an estimated $16 million in stock.. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dropped its stock, about $1 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds in Q4.
How have insiders been trading Reynolds American, Inc. (NYSE:RAI)?
Insider buying is at its handiest when the primary stock in question has experienced transactions within the past six months. Over the latest half-year time period, Reynolds American, Inc. (NYSE:RAI) has experienced zero unique insiders buying, and 15 insider sales (see the details of insider trades here).
With the returns shown by Insider Monkey’s studies, everyday investors must always pay attention to hedge fund and insider trading sentiment, and Reynolds American, Inc. (NYSE:RAI) is an important part of this process.
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.
