Is Solera Holdings Inc (SLH) Going to Burn These Hedge Funds?

Solera Holdings Inc (NYSE:SLH) was in 6 hedge funds’ portfolio at the end of the fourth quarter of 2012. SLH shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 6 hedge funds in our database with SLH holdings at the end of the previous quarter.

To the average investor, there are dozens of gauges shareholders can use to track stocks. Two of the most innovative are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the elite fund managers can outpace their index-focused peers by a very impressive amount (see just how much).

Just as beneficial, optimistic insider trading activity is another way to parse down the stock market universe. There are plenty of reasons for an insider to cut shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the useful potential of this tactic if piggybackers know what to do (learn more here).

Consequently, let’s take a glance at the key action surrounding Solera Holdings Inc (NYSE:SLH).

What have hedge funds been doing with Solera Holdings Inc (NYSE:SLH)?

At the end of the fourth quarter, a total of 6 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully.

When looking at the hedgies we track, Cantillon Capital Management, managed by William von Mueffling, holds the largest position in Solera Holdings Inc (NYSE:SLH). Cantillon Capital Management has a $93.6 million position in the stock, comprising 3.5% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $5.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism include D. E. Shaw’s D E Shaw, Joel Greenblatt’s Gotham Asset Management and Steven Cohen’s SAC Capital Advisors.

Since Solera Holdings Inc (NYSE:SLH) has witnessed falling interest from the smart money, it’s easy to see that there exists a select few money managers that elected to cut their positions entirely at the end of the year. Interestingly, Jim Simons’s Renaissance Technologies cut the biggest investment of all the hedgies we watch, comprising an estimated $2.2 million in stock. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading Solera Holdings Inc (NYSE:SLH)?

Bullish insider trading is particularly usable when the company in question has seen transactions within the past six months. Over the latest six-month time frame, Solera Holdings Inc (NYSE:SLH) has seen zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Solera Holdings Inc (NYSE:SLH). These stocks are Aspen Technology, Inc. (NASDAQ:AZPN), Tibco Software Inc. (NASDAQ:TIBX), Total System Services, Inc. (NYSE:TSS), Informatica Corporation (NASDAQ:INFA), and Jack Henry & Associates, Inc. (NASDAQ:JKHY). This group of stocks are the members of the business software & services industry and their market caps resemble SLH’s market cap.

With the returns shown by Insider Monkey’s studies, retail investors must always monitor hedge fund and insider trading activity, and Solera Holdings Inc (NYSE:SLH) is an important part of this process.

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