International Business Machines Corp. (IBM): You Should Really Watch These Two Indicators

International Business Machines Corp. (NYSE:IBM) was in 47 hedge funds’ portfolio at the end of the fourth quarter of 2012. IBM shareholders have witnessed a decrease in hedge fund interest recently. There were 48 hedge funds in our database with IBM holdings at the end of the previous quarter.

In the eyes of most shareholders, hedge funds are assumed to be unimportant, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation at present, we at Insider Monkey look at the upper echelon of this club, close to 450 funds. Most estimates calculate that this group oversees the lion’s share of the hedge fund industry’s total capital, and by keeping an eye on their highest performing picks, we have found a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy beat 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 beaten the S&P 500 index by 24 percentage points in 7 months (see the details here).

Equally as key, bullish insider trading sentiment is another way to parse down the stock market universe. Just as you’d expect, there are a number of motivations for a bullish insider to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the valuable potential of this method if shareholders know where to look (learn more here).

Consequently, we’re going to take a glance at the key action encompassing International Business Machines Corp. (NYSE:IBM).

What does the smart money think about International Business Machines Corp. (NYSE:IBM)?

At year’s end, a total of 47 of the hedge funds we track were bullish in this stock, a change of -2% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully.

When looking at the hedgies we track, Warren Buffett’s Berkshire Hathaway had the largest position in International Business Machines Corp. (NYSE:IBM), worth close to $13.0475 billion, accounting for 17.3% of its total 13F portfolio. The second largest stake is held by Fisher Asset Management, managed by Ken Fisher, which held a $624.9 million position; 1.7% of its 13F portfolio is allocated to the company. Some other hedgies that hold long positions include D. E. Shaw’s D E Shaw, Phill Gross and Robert Atchinson’s Adage Capital Management and Ric Dillon’s Diamond Hill Capital.

Judging by the fact that International Business Machines Corp. (NYSE:IBM) has witnessed falling interest from the smart money, logic holds that there exists a select few money managers that decided to sell off their full holdings in Q4. At the top of the heap, Louis Navellier’s Navellier & Associates dumped the largest position of the 450+ funds we track, comprising an estimated $76.4 million in stock.. Joe DiMenna’s fund, ZWEIG DIMENNA PARTNERS, also cut its stock, about $39.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in Q4.

How are insiders trading International Business Machines Corp. (NYSE:IBM)?

Bullish insider trading is at its handiest when the company we’re looking at has experienced transactions within the past half-year. Over the last six-month time period, International Business Machines Corp. (NYSE:IBM) has seen zero unique insiders buying, and 17 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to International Business Machines Corp. (NYSE:IBM). These stocks are Silicon Graphics International Corp (NASDAQ:SGI), Cray Inc. (NASDAQ:CRAY), Teradata Corporation (NYSE:TDC), , and Hewlett-Packard Company (NYSE:HPQ). This group of stocks are the members of the diversified computer systems industry and their market caps are closest to IBM’s market cap.

With the results shown by our time-tested strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and International Business Machines Corp. (NYSE:IBM) is no exception.

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