Is El Paso Electric Company (EE) Going to Burn These Hedge Funds?

Should El Paso Electric Company (NYSE:EE) investors track the following data?

In the financial world, there are a multitude of methods investors can use to watch publicly traded companies. Some of the most useful are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the top investment managers can beat the broader indices by a significant margin (see just how much).

Equally as useful, positive insider trading activity is a second way to look at the investments you’re interested in. As the old adage goes: there are a variety of reasons for a corporate insider to downsize shares of his or her company, but only one, very obvious reason why they would behave bullishly. Plenty of academic studies have demonstrated the useful potential of this strategy if shareholders understand where to look (learn more here).

Keeping this in mind, we’re going to analyze the recent info for El Paso Electric Company (NYSE:EE).

How have hedgies been trading El Paso Electric Company (NYSE:EE)?

At the end of the second quarter, a total of 10 of the hedge funds we track held long positions in this stock, a change of -17% from one quarter earlier. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably.

According to our 13F database, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in El Paso Electric Company (NYSE:EE). GAMCO Investors has a $65.8 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $39.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds that hold long positions include D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group.

Since El Paso Electric Company (NYSE:EE) has experienced bearish sentiment from the top-tier hedge fund industry, we can see that there was a specific group of fund managers who were dropping their positions entirely last quarter. Interestingly, Clint Carlson’s Carlson Capital dropped the biggest position of the “upper crust” of funds we watch, comprising an estimated $2.8 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also sold off its stock, about $1.8 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds last quarter.

What have insiders been doing with El Paso Electric Company (NYSE:EE)?

Legal insider trading, particularly when it’s bullish, is best served when the primary stock in question has experienced transactions within the past six months. Over the latest six-month time period, El Paso Electric Company (NYSE:EE) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to El Paso Electric Company (NYSE:EE). These stocks are UIL Holdings Corporation (NYSE:UIL), Black Hills Corp (NYSE:BKH), Ormat Technologies, Inc. (NYSE:ORA), The Empire District Electric Company (NYSE:EDE), and Atlantic Power Corp (NYSE:AT). This group of stocks are in the electric utilities industry and their market caps match EE’s market cap.