Here is What Hedge Funds Think About Consolidated Edison, Inc. (NYSE:ED)

Consolidated Edison, Inc. (NYSE:ED) shareholders have witnessed a decrease in enthusiasm from smart money lately.

If you’d ask most traders, hedge funds are seen as worthless, outdated investment vehicles of years past. While there are over 8000 funds in operation at the moment, we look at the aristocrats of this group, around 450 funds. Most estimates calculate that this group controls the lion’s share of the smart money’s total capital, and by watching their top equity investments, we have unsheathed a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Just as beneficial, bullish insider trading sentiment is a second way to parse down the stock market universe. Just as you’d expect, there are a variety of reasons for an executive to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this method if you understand what to do (learn more here).

With all of this in mind, it’s important to take a glance at the latest action regarding Consolidated Edison, Inc. (NYSE:ED).

Hedge fund activity in Consolidated Edison, Inc. (NYSE:ED)

In preparation for this year, a total of 15 of the hedge funds we track held long positions in this stock, a change of -12% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially.

When looking at the hedgies we track, Jim Simons’s Renaissance Technologies had the biggest position in Consolidated Edison, Inc. (NYSE:ED), worth close to $74 million, comprising 0.2% of its total 13F portfolio. Coming in second is Winton Capital Management, managed by David Harding, which held a $43 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other hedge funds with similar optimism include Clint Carlson’s Carlson Capital, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group.

Because Consolidated Edison, Inc. (NYSE:ED) has experienced falling interest from the smart money, logic holds that there is a sect of hedgies who sold off their positions entirely heading into 2013. Intriguingly, Michael Messner’s Seminole Capital (Investment Mgmt) dumped the biggest position of all the hedgies we track, worth about $15 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund dropped about $14 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into 2013.

How have insiders been trading Consolidated Edison, Inc. (NYSE:ED)?

Bullish insider trading is best served when the company in question has experienced transactions within the past six months. Over the latest 180-day time frame, Consolidated Edison, Inc. (NYSE:ED) has seen 1 unique insiders purchasing, 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 Consolidated Edison, Inc. (NYSE:ED). These stocks are FirstEnergy Corp. (NYSE:FE), PPL Corporation (NYSE:PPL), Korea Electric Power Corporation (ADR) (NYSE:KEP), Edison International (NYSE:EIX), and PG&E Corporation (NYSE:PCG). All of these stocks are in the electric utilities industry and their market caps are similar to ED’s market cap.

With the returns demonstrated by our studies, everyday investors must always monitor hedge fund and insider trading sentiment, and Consolidated Edison, Inc. (NYSE:ED) is an important part of this process.

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Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.