Lloyds Banking Group PLC (ADR) (NYSE:LYG) shareholders have witnessed an increase in enthusiasm from smart money in recent months, and while we can’t track their London-traded peer shares, Lloyds Banking Group PLC (LON:LLOY), the ADRs provide a decent proxy over the long term. Plus, when hedge fund interest in the banking giant’s ADRs increase, it’s logical to conclude that these bullish characteristics carry over to Lloyds Banking Group PLC (LON:LLOY) as well.
According to most stock holders, hedge funds are assumed to be underperforming, old financial tools of yesteryear.
While there are more than 8000 funds with their doors open today, we at Insider Monkey choose to focus on the moguls of this club, about 450 funds. It is widely believed that this group oversees most of all hedge funds’ total capital, and by paying attention to their highest performing equity investments, we have come up with a few investment strategies that have historically beaten the S&P 500 index.
Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year 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 outpaced the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Equally as integral, bullish insider trading sentiment is another way to break down the financial markets. As the old adage goes: there are a number of incentives for a corporate insider to downsize shares of his or her company, but only one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the useful potential of this strategy if shareholders know what to do (learn more here).
Keeping this in mind, let’s take a look at the key action regarding Lloyds Banking Group PLC (LON:LLOY)’s ADR shares, Lloyds Banking Group PLC (ADR) (NYSE:LYG).
How are hedge funds trading Lloyds Banking Group PLC (ADR) (NYSE:LYG)?
Heading into 2013, a total of 7 of the hedge funds we track were long in Lloyds Banking Group PLC (LON:LLOY)’s ADR shares, a change of 75% 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 increasing their stakes meaningfully.
Of the funds we track, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in Lloyds Banking Group PLC (LON:LLOY)’s ADR shares. Arrowstreet Capital has a $12.7 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Vertex One Asset Management, managed by John Thiessen, which held a $9.6 million position; 1.7% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and Steven Cohen’s SAC Capital Advisors.
Consequently, specific money managers have been driving this bullishness. Vertex One Asset Management, managed by John Thiessen, initiated the biggest position in Lloyds Banking Group PLC (LON:LLOY)’s ADR shares. Vertex One Asset Management had 9.6 million invested in the company at the end of the quarter. Steven Cohen’s SAC Capital Advisors also made a $0.5 million investment in the stock during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.
What have insiders been doing with Lloyds Banking Group PLC (ADR) (NYSE:LYG)?
Insider trading activity, especially when it’s bullish, is at its handiest when the primary stock in question has experienced transactions within the past six months. Over the last half-year time frame, Lloyds Banking Group PLC (ADR) (NYSE:LYG) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Lloyds Banking Group PLC (LON:LLOY). On the ADR front, they are Credit Suisse Group AG (ADR) (NYSE:CS), Banco Santander, S.A. (ADR) (NYSE:SAN), Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), UBS AG (USA) (NYSE:UBS), and Barclays PLC (ADR) (NYSE:BCS). All of these stocks are in the foreign money center banks industry and their market caps are similar to LYG’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Credit Suisse Group AG (ADR) (NYSE:CS) | 9 | 0 | 0 |
| Banco Santander, S.A. (ADR) (NYSE:SAN) | 12 | 1 | 0 |
| Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) | 12 | 0 | 0 |
| UBS AG (USA) (NYSE:UBS) | 11 | 0 | 0 |
| Barclays PLC (ADR) (NYSE:BCS) | 11 | 0 | 0 |
With the results exhibited by the aforementioned tactics, retail investors must always watch hedge fund and insider trading sentiment, and Lloyds Banking Group PLC (ADR) (NYSE:LYG), and subsequently Lloyds Banking Group PLC (LON:LLOY), are no exception.
