Southwestern Energy Company (SWN): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Southwestern Energy Company (NYSE:SWN) was in 34 hedge funds’ portfolio at the end of March. SWN investors should be aware of an increase in support from the world’s most elite money managers of late. There were 32 hedge funds in our database with SWN positions at the end of the previous quarter.

To most investors, hedge funds are assumed to be unimportant, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation today, we choose to focus on the elite of this group, about 450 funds. It is estimated that this group has its hands on most of the hedge fund industry’s total capital, and by watching their highest performing investments, we have discovered a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outstripped 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as key, positive insider trading activity is another way to parse down the stock market universe. Obviously, there are plenty of motivations for an upper level exec to get rid of shares of his or her company, but only one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the market-beating potential of this method if you understand where to look (learn more here).

Keeping this in mind, it’s important to take a look at the latest action regarding Southwestern Energy Company (NYSE:SWN).

How have hedgies been trading Southwestern Energy Company (NYSE:SWN)?

At the end of the first quarter, a total of 34 of the hedge funds we track were long in this stock, a change of 6% from the first quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially.

When looking at the hedgies we track, Legg Mason Capital Management, managed by Bill Miller, holds the most valuable position in Southwestern Energy Company (NYSE:SWN). Legg Mason Capital Management has a $70.2 million position in the stock, comprising 1.2% of its 13F portfolio. On Legg Mason Capital Management’s heels is Millennium Management, managed by Israel Englander, which held a $59.9 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Wallace Weitz’s Wallace R. Weitz & Co. and Robert Pitts’s Steadfast Capital Management.

As industrywide interest jumped, key money managers have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, initiated the most outsized position in Southwestern Energy Company (NYSE:SWN). Renaissance Technologies had 50 million invested in the company at the end of the quarter. Paul Singer’s Elliott Management also made a $33.6 million investment in the stock during the quarter. The other funds with new positions in the stock are George Soros’s Soros Fund Management, Stanley Druckenmiller’s Duquesne Capital, and Andrew Sandler’s Sandler Capital Management.

What do corporate executives and insiders think about Southwestern Energy Company (NYSE:SWN)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company in question has experienced transactions within the past six months. Over the latest 180-day time frame, Southwestern Energy Company (NYSE:SWN) has seen zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Southwestern Energy Company (NYSE:SWN). These stocks are Cabot Oil & Gas Corporation (NYSE:COG), Chesapeake Energy Corporation (NYSE:CHK), Talisman Energy Inc. (USA) (NYSE:TLM), and Range Resources Corp. (NYSE:RRC). This group of stocks are in the independent oil & gas industry and their market caps are closest to SWN’s market cap.

With the results exhibited by the aforementioned time-tested strategies, everyday investors should always keep an eye on hedge fund and insider trading activity, and Southwestern Energy Company (NYSE:SWN) is no exception.

Click here to learn why you should track hedge funds