Should You Buy Penske Automotive Group, Inc. (PAG)?

What’s a smart Penske Automotive Group, Inc. (NYSE:PAG) investor to do?

To many of your fellow readers, hedge funds are assumed to be delayed, old financial vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds trading in present day, Insider Monkey looks at the moguls of this club, about 525 funds. It is widely held that this group controls the lion’s share of all hedge funds’ total capital, and by monitoring their best investments, we’ve found a few investment strategies that have historically outpaced the S&P 500. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a 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 topped the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as key, optimistic insider trading sentiment is another way to look at the marketplace. Just as you’d expect, there are plenty of motivations for an insider to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Many empirical studies have demonstrated the valuable potential of this strategy if you understand where to look (learn more here).

Keeping this in mind, we’re going to study the recent info about Penske Automotive Group, Inc. (NYSE:PAG).

How have hedgies been trading Penske Automotive Group, Inc. (NYSE:PAG)?

Heading into Q3, a total of 18 of the hedge funds we track were long in this stock, a change of 20% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially.

Out of the hedge funds we follow, Royce & Associates, managed by Chuck Royce, holds the biggest position in Penske Automotive Group, Inc. (NYSE:PAG). Royce & Associates has a $20.6 million position in the stock, comprising 0.1% of its 13F portfolio. On Royce & Associates’s heels is Dennis Leibowitz of Act II Capital, with a $18.1 million position; the fund has 4.9% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Mario Gabelli’s GAMCO Investors, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management.

As one would understandably expect, specific money managers were leading the bulls’ herd. Royce & Associates, managed by Chuck Royce, established the most valuable position in Penske Automotive Group, Inc. (NYSE:PAG). Royce & Associates had 20.6 million invested in the company at the end of the quarter. Dennis Leibowitz’s Act II Capital also initiated a $18.1 million position during the quarter. The other funds with brand new PAG positions are Mario Gabelli’s GAMCO Investors, Ken Griffin’s Citadel Investment Group, and Israel Englander’s Millennium Management.

How have insiders been trading Penske Automotive Group, Inc. (NYSE:PAG)?

Legal insider trading, particularly when it’s bullish, is particularly usable when the primary stock in question has seen transactions within the past six months. Over the last half-year time period, Penske Automotive Group, Inc. (NYSE:PAG) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Penske Automotive Group, Inc. (NYSE:PAG). These stocks are Group 1 Automotive, Inc. (NYSE:GPI), Sonic Automotive Inc (NYSE:SAH), AutoNation, Inc. (NYSE:AN), Copart, Inc. (NASDAQ:CPRT), and KAR Auction Services Inc (NYSE:KAR). This group of stocks are the members of the auto dealerships industry and their market caps are closest to PAG’s market cap.

Using the results shown by our studies, average investors must always track hedge fund and insider trading sentiment, and Penske Automotive Group, Inc. (NYSE:PAG) is no exception.

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