Is Prospect Capital Corporation (NASDAQ:PSEC) a buy, sell, or hold? The best stock pickers are getting more bullish. The number of long hedge fund positions moved up by 1 recently.
In the eyes of most investors, hedge funds are seen as unimportant, old financial tools of yesteryear. While there are greater than 8000 funds in operation at present, we choose to focus on the top tier of this club, around 450 funds. It is estimated that this group oversees the majority of all hedge funds’ total asset base, and by tracking their highest performing investments, we have unearthed a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Just as integral, positive insider trading activity is another way to break down the investments you’re interested in. There are many incentives for an upper level exec to drop shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the useful potential of this tactic if investors know where to look (learn more here).
With these “truths” under our belt, let’s take a glance at the latest action regarding Prospect Capital Corporation (NASDAQ:PSEC).
How have hedgies been trading Prospect Capital Corporation (NASDAQ:PSEC)?
At the end of the first quarter, a total of 11 of the hedge funds we track were bullish in this stock, a change of 10% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly.
When looking at the hedgies we track, Ken Griffin’s Citadel Investment Group had the biggest position in Prospect Capital Corporation (NASDAQ:PSEC), worth close to $30.4 million, accounting for less than 0.1%% of its total 13F portfolio. On Citadel Investment Group’s heels is AQR Capital Management, managed by Cliff Asness, which held a $10 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include David Dreman’s Dreman Value Management, D. E. Shaw’s D E Shaw and Alec Litowitz and Ross Laser’s Magnetar Capital.
As one would reasonably expect, key money managers have jumped into Prospect Capital Corporation (NASDAQ:PSEC) headfirst. Dreman Value Management, managed by David Dreman, assembled the most valuable position in Prospect Capital Corporation (NASDAQ:PSEC). Dreman Value Management had 8.6 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $2.8 million position during the quarter. The other funds with brand new PSEC positions are Alec Litowitz and Ross Laser’s Magnetar Capital, Israel Englander’s Millennium Management, and David Harding’s Winton Capital Management.
What have insiders been doing with Prospect Capital Corporation (NASDAQ:PSEC)?
Insider trading activity, especially when it’s bullish, is most useful when the company in question has seen transactions within the past 180 days. Over the last 180-day time period, Prospect Capital Corporation (NASDAQ:PSEC) has seen 1 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 Prospect Capital Corporation (NASDAQ:PSEC). These stocks are Encore Capital Group, Inc. (NASDAQ:ECPG), Pacific Coast Oil Trust (NYSE:ROYT), Blackrock Kelso Capital Corp. (NASDAQ:BKCC), Triangle Capital Corporation (NYSE:TCAP), and The India Fund, Inc. (NYSE:IFN). This group of stocks are the members of the asset management industry and their market caps are similar to PSEC’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Encore Capital Group, Inc. (NASDAQ:ECPG) | 11 | 1 | 2 |
| Pacific Coast Oil Trust (NYSE:ROYT) | 1 | 0 | 0 |
| Blackrock Kelso Capital Corp. (NASDAQ:BKCC) | 9 | 0 | 2 |
| Triangle Capital Corporation (NYSE:TCAP) | 4 | 0 | 0 |
| The India Fund, Inc. (NYSE:IFN) | 4 | 0 | 0 |
With the returns exhibited by our time-tested strategies, everyday investors should always keep an eye on hedge fund and insider trading activity, and Prospect Capital Corporation (NASDAQ:PSEC) applies perfectly to this mantra.
