Is Walter Energy, Inc. (WLT) Going to Burn These Hedge Funds?

Walter Energy, Inc. (NYSE:WLT) was in 26 hedge funds’ portfolio at the end of the first quarter of 2013. WLT investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 31 hedge funds in our database with WLT holdings at the end of the previous quarter.

In the financial world, there are many gauges investors can use to analyze the equity markets. Some of the best are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best fund managers can trounce the broader indices by a healthy amount (see just how much).

Just as key, bullish insider trading sentiment is a second way to break down the marketplace. As the old adage goes: there are lots of reasons for a bullish insider to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this tactic if you understand where to look (learn more here).

Keeping this in mind, we’re going to take a look at the key action encompassing Walter Energy, Inc. (NYSE:WLT).

How are hedge funds trading Walter Energy, Inc. (NYSE:WLT)?

Heading into Q2, a total of 26 of the hedge funds we track held long positions in this stock, a change of -16% from the first quarter.

Because Walter Energy, Inc. (NYSE:WLT) has faced a declination in interest from the smart money, it’s easy to see that there exists a select few hedge funds that decided to sell off their full holdings in Q1. Intriguingly, Jim Simons’s Renaissance Technologies dumped the biggest position of the 450+ funds we monitor, worth close to $51.6 million in stock.. Bruce J. Richards and Louis Hanover’s fund, Marathon Asset Management, also dumped its stock, about $51.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds in Q1.

How are insiders trading Walter Energy, Inc. (NYSE:WLT)?

Insider buying is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the last half-year time frame, Walter Energy, Inc. (NYSE:WLT) has experienced 11 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Walter Energy, Inc. (NYSE:WLT). These stocks are Alliance Resource Partners, L.P. (NASDAQ:ARLP), PVR Partners LP (NYSE:PVR), Stillwater Mining Company (NYSE:SWC), HudBay Minerals Inc Ord Shs (NYSE:HBM), and Alpha Natural Resources, Inc. (NYSE:ANR). This group of stocks are in the industrial metals & minerals industry and their market caps are similar to WLT’s market cap.

With the returns demonstrated by Insider Monkey’s research, retail investors should always watch hedge fund and insider trading activity, and Walter Energy, Inc. (NYSE:WLT) is no exception.

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