Should You Buy Ares Capital Corporation (ARCC)?

Ares Capital Corporation (NASDAQ:ARCC) was in 16 hedge funds’ portfolio at the end of March. ARCC has seen an increase in hedge fund interest in recent months. There were 15 hedge funds in our database with ARCC positions at the end of the previous quarter.

To the average investor, there are dozens of metrics investors can use to monitor publicly traded companies. A couple of the best are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass their index-focused peers by a superb margin (see just how much).

Just as beneficial, optimistic insider trading activity is a second way to break down the world of equities. Just as you’d expect, there are plenty of reasons for an executive to downsize shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various empirical studies have demonstrated the impressive potential of this method if you know what to do (learn more here).

With these “truths” under our belt, we’re going to take a look at the latest action regarding Ares Capital Corporation (NASDAQ:ARCC).

What does the smart money think about Ares Capital Corporation (NASDAQ:ARCC)?

In preparation for this quarter, a total of 16 of the hedge funds we track were long in this stock, a change of 7% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably.

Of the funds we track, John Overdeck and David Siegel’s Two Sigma Advisors had the biggest position in Ares Capital Corporation (NASDAQ:ARCC), worth close to $25.2 million, comprising 0.4% of its total 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $22.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds that hold long positions include Amy Minella’s Cardinal Capital, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group.

As one would reasonably expect, specific money managers were breaking ground themselves. Intrepid Capital Management Inc DE, managed by Steve Shapiro, created the largest position in Ares Capital Corporation (NASDAQ:ARCC). Intrepid Capital Management Inc DE had 2.3 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $1.2 million position during the quarter. The other funds with new positions in the stock are Christopher C. Grisanti’s Grisanti Brown & Partners and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.

How have insiders been trading Ares Capital Corporation (NASDAQ:ARCC)?

Insider purchases made by high-level executives is most useful when the company in question has seen transactions within the past 180 days. Over the latest half-year time frame, Ares Capital Corporation (NASDAQ:ARCC) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Ares Capital Corporation (NASDAQ:ARCC). These stocks are NYSE Euronext (NYSE:NYX), A.F.P Provida SA (ADR) (NYSE:PVD), Apollo Global Management LLC (NYSE:APO), CBOE Holdings, Inc (NASDAQ:CBOE), and NASDAQ OMX Group, Inc. (NASDAQ:NDAQ). This group of stocks are in the diversified investments industry and their market caps are similar to ARCC’s market cap.

With the returns exhibited by our research, everyday investors should always keep an eye on hedge fund and insider trading activity, and Ares Capital Corporation (NASDAQ:ARCC) is no exception.

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