Here is What Hedge Funds Think About RLI Corp. (RLI)

RLI Corp. (NYSE:RLI) investors should pay attention to a decrease in hedge fund interest lately.

In the eyes of most investors, hedge funds are assumed to be worthless, old financial vehicles of years past. While there are over 8000 funds trading at the moment, we at Insider Monkey choose to focus on the leaders of this club, close to 450 funds. Most estimates calculate that this group has its hands on the lion’s share of all hedge funds’ total asset base, and by keeping an eye on their best stock picks, we have brought to light a few investment strategies that have historically beaten Mr. 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 trumped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Just as key, positive insider trading activity is another way to parse down the investments you’re interested in. There are many motivations for a corporate insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of empirical studies have demonstrated the impressive potential of this tactic if piggybackers understand what to do (learn more here).

With these “truths” under our belt, we’re going to take a glance at the latest action surrounding RLI Corp. (NYSE:RLI).

How are hedge funds trading RLI Corp. (NYSE:RLI)?

Heading into 2013, a total of 6 of the hedge funds we track were long in this stock, a change of -14% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings substantially.

According to our comprehensive database, Tom Gayner’s Markel Gayner Asset Management had the most valuable position in RLI Corp. (NYSE:RLI), worth close to $39.7 million, comprising 1.7% of its total 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, managed by Chuck Royce, which held a $9.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Brian Ashford-Russell and Tim Woolley’s Polar Capital, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group.

Seeing as RLI Corp. (NYSE:RLI) has witnessed falling interest from the smart money, it’s safe to say that there were a few funds who sold off their positions entirely at the end of the year. Interestingly, Jim Simons’s Renaissance Technologies said goodbye to the largest stake of the 450+ funds we monitor, comprising about $2.1 million in stock.. D. E. Shaw’s fund, D E Shaw, also cut its stock, about $0.3 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds at the end of the year.

Insider trading activity in RLI Corp. (NYSE:RLI)

Insider buying is best served when the company in question has experienced transactions within the past 180 days. Over the latest six-month time period, RLI Corp. (NYSE:RLI) has experienced zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to RLI Corp. (NYSE:RLI). These stocks are Kemper Corporation (NYSE:KMPR), Platinum Underwriters Holdings, Ltd. (NYSE:PTP), Radian Group Inc (NYSE:RDN), Selective Insurance Group (NASDAQ:SIGI), and Montpelier Re Holdings Ltd. (NYSE:MRH). This group of stocks are in the property & casualty insurance industry and their market caps are closest to RLI’s market cap.

With the results demonstrated by our research, retail investors should always pay attention to hedge fund and insider trading sentiment, and RLI Corp. (NYSE:RLI) applies perfectly to this mantra.

Click here to learn why you should track hedge funds