Plum Creek Timber Co. Inc. (PCL): Hedge Funds and Insiders Are Bearish, What Should You Do?

Plum Creek Timber Co. Inc. (NYSE:PCL) investors should be aware of a decrease in hedge fund sentiment recently.

To most shareholders, hedge funds are perceived as unimportant, outdated investment tools of the past. While there are more than 8000 funds in operation at the moment, we at Insider Monkey hone in on the leaders of this group, around 450 funds. It is estimated that this group controls most of the smart money’s total asset base, and by keeping an eye on their best stock picks, we have formulated a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum 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 23.3 percentage points in 8 months (see the details here).

Just as integral, optimistic insider trading sentiment is another way to break down the marketplace. There are many incentives for a corporate insider to drop shares of his or her company, but only one, very simple reason why they would buy. Various academic studies have demonstrated the useful potential of this method if piggybackers know where to look (learn more here).

Now, let’s take a look at the latest action encompassing Plum Creek Timber Co. Inc. (NYSE:PCL).

Hedge fund activity in Plum Creek Timber Co. Inc. (NYSE:PCL)

At the end of the first quarter, a total of 12 of the hedge funds we track were bullish in this stock, a change of -14% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially.

When looking at the hedgies we track, Jean-Marie Eveillard’s First Eagle Investment Management had the most valuable position in Plum Creek Timber Co. Inc. (NYSE:PCL), worth close to $412.6 million, comprising 1.4% of its total 13F portfolio. Coming in second is Tom Gayner of Markel Gayner Asset Management, with a $18.3 million position; 0.7% of its 13F portfolio is allocated to the stock. Other hedgies that hold long positions include Phill Gross and Robert Atchinson’s Adage Capital Management, David Harding’s Winton Capital Management and D. E. Shaw’s D E Shaw.

Due to the fact that Plum Creek Timber Co. Inc. (NYSE:PCL) has experienced bearish sentiment from the smart money, it’s easy to see that there is a sect of hedgies that slashed their full holdings at the end of the first quarter. Interestingly, Matthew Hulsizer’s PEAK6 Capital Management dropped the biggest investment of all the hedgies we key on, comprising an estimated $4 million in call options, and John Fichthorn of Dialectic Capital Management was right behind this move, as the fund sold off about $1.3 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds at the end of the first quarter.

Insider trading activity in Plum Creek Timber Co. Inc. (NYSE:PCL)

Insider buying is at its handiest when the company we’re looking at has seen transactions within the past six months. Over the latest 180-day time period, Plum Creek Timber Co. Inc. (NYSE:PCL) has experienced zero unique insiders purchasing, and 12 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Plum Creek Timber Co. Inc. (NYSE:PCL). These stocks are Senior Housing Properties Trust (NYSE:SNH), American Capital Agency Corp. (NASDAQ:AGNC), Essex Property Trust Inc (NYSE:ESS), Camden Property Trust (NYSE:CPT), and UDR, Inc. (NYSE:UDR). This group of stocks are the members of the reit – residential industry and their market caps resemble PCL’s market cap.