This Metric Says You Are Smart to Sell Alliant Energy Corporation (LNT)

Is Alliant Energy Corporation (NYSE:LNT) a safe investment now? Hedge funds are selling. The number of long hedge fund positions decreased by 2 lately.

To most investors, hedge funds are assumed to be underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds in operation at present, we choose to focus on the bigwigs of this club, about 450 funds. It is estimated that this group has its hands on the majority of the hedge fund industry’s total capital, and by paying attention to their highest performing equity investments, we have unsheathed a number of investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as key, positive insider trading activity is another way to break down the stock market universe. There are a number of stimuli for a corporate insider to cut shares of his or her company, but only one, very clear reason why they would buy. Many academic studies have demonstrated the useful potential of this method if investors understand where to look (learn more here).

Now, it’s important to take a glance at the recent action surrounding Alliant Energy Corporation (NYSE:LNT).

What does the smart money think about Alliant Energy Corporation (NYSE:LNT)?

Heading into Q2, a total of 13 of the hedge funds we track were bullish in this stock, a change of -13% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes meaningfully.

Of the funds we track, Millennium Management, managed by Israel Englander, holds the biggest position in Alliant Energy Corporation (NYSE:LNT). Millennium Management has a $67.7 million position in the stock, comprising 0.3% of its 13F portfolio. On Millennium Management’s heels is D. E. Shaw of D E Shaw, with a $18.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism include Ken Griffin’s Citadel Investment Group, Jacob Gottlieb’s Visium Asset Management and Cliff Asness’s AQR Capital Management.

Judging by the fact that Alliant Energy Corporation (NYSE:LNT) has faced a declination in interest from hedge fund managers, it’s easy to see that there is a sect of funds that slashed their entire stakes in Q1. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors sold off the largest investment of all the hedgies we track, totaling about $2.3 million in stock., and Ken Gray and Steve Walsh of Bryn Mawr Capital was right behind this move, as the fund said goodbye to about $2.2 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds in Q1.

What do corporate executives and insiders think about Alliant Energy Corporation (NYSE:LNT)?

Bullish insider trading is at its handiest when the primary stock in question has experienced transactions within the past six months. Over the latest 180-day time frame, Alliant Energy Corporation (NYSE:LNT) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Alliant Energy Corporation (NYSE:LNT). These stocks are Centrais Eletricas Brasileiras SA (ADR) (NYSE:EBR), ITC Holdings Corp. (NYSE:ITC), Pinnacle West Capital Corporation (NYSE:PNW), Pepco Holdings, Inc. (NYSE:POM), and Brookfield Infrastructure Partners L.P. (NYSE:BIP). All of these stocks are in the electric utilities industry and their market caps resemble LNT’s market cap.

With the returns demonstrated by the aforementioned tactics, everyday investors must always watch hedge fund and insider trading activity, and Alliant Energy Corporation (NYSE:LNT) is an important part of this process.

Click here to learn why you should track hedge funds