This Metric Says You Are Smart to Sell Portfolio Recovery Associates, Inc. (PRAA)

Portfolio Recovery Associates, Inc. (NASDAQ:PRAA) was in 4 hedge funds’ portfolio at the end of March. PRAA investors should be aware of a decrease in activity from the world’s largest hedge funds of late. There were 4 hedge funds in our database with PRAA positions at the end of the previous quarter.

According to most traders, hedge funds are perceived as unimportant, outdated financial tools of the past. While there are over 8000 funds in operation today, we at Insider Monkey hone in on the leaders of this club, close to 450 funds. Most estimates calculate that this group controls the majority of the smart money’s total capital, and by monitoring their highest performing equity investments, we have unsheathed a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outpaced 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 topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as key, optimistic insider trading activity is another way to parse down the investments you’re interested in. Just as you’d expect, there are a variety of incentives for a bullish insider to get rid of 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 piggybackers understand where to look (learn more here).

Keeping this in mind, it’s important to take a look at the latest action encompassing Portfolio Recovery Associates, Inc. (NASDAQ:PRAA).

Hedge fund activity in Portfolio Recovery Associates, Inc. (NASDAQ:PRAA)

At the end of the first quarter, a total of 4 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully.

Of the funds we track, Cliff Asness’s AQR Capital Management had the most valuable position in Portfolio Recovery Associates, Inc. (NASDAQ:PRAA), worth close to $1.6 million, accounting for less than 0.1%% of its total 13F portfolio. On AQR Capital Management’s heels is Citadel Investment Group, managed by Ken Griffin, which held a $1.2 million call position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Matthew Tewksbury’s Stevens Capital Management.

Since Portfolio Recovery Associates, Inc. (NASDAQ:PRAA) has experienced a declination in interest from the entirety of the hedge funds we track, we can see that there were a few hedgies who sold off their full holdings at the end of the first quarter. Interestingly, Jim Simons’s Renaissance Technologies sold off the biggest position of all the hedgies we monitor, worth an estimated $2.1 million in stock.. Steven Cohen’s fund, SAC Capital Advisors, also cut its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with Portfolio Recovery Associates, Inc. (NASDAQ:PRAA)?

Insider trading activity, especially when it’s bullish, is most useful when the company in focus has seen transactions within the past half-year. Over the last half-year time frame, Portfolio Recovery Associates, Inc. (NASDAQ:PRAA) has experienced zero unique insiders buying, and 7 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Portfolio Recovery Associates, Inc. (NASDAQ:PRAA). These stocks are HMS Holdings Corp. (NASDAQ:HMSY), Ritchie Bros. Auctioneers (USA) (NYSE:RBA), Deluxe Corporation (NYSE:DLX), RR Donnelley & Sons Co (NASDAQ:RRD), and Lender Processing Services, Inc. (NYSE:LPS). This group of stocks are the members of the business services industry and their market caps match PRAA’s market cap.

With the results demonstrated by the aforementioned tactics, retail investors must always keep an eye on hedge fund and insider trading sentiment, and Portfolio Recovery Associates, Inc. (NASDAQ:PRAA) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds