This Metric Says You Are Smart to Sell Prudential Financial Inc (PRU)

Is Prudential Financial Inc (NYSE:PRU) going to burn you?

To many investors, hedge funds are viewed as delayed, outdated investment vehicles of an era lost to time. Although there are more than 8,000 hedge funds with their doors open in present day, this site aim at the aristocrats of this group, about 525 funds. Analysts calculate that this group controls the lion’s share of the hedge fund industry’s total assets, and by keeping an eye on their highest performing equity investments, we’ve formulated a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy beat 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 outpaced the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

Just as crucial, positive insider trading activity is another way to look at the world of equities. As the old adage goes: there are a number of reasons for an insider to downsize shares of his or her company, but just one, very clear reason why they would initiate a purchase. Several academic studies have demonstrated the valuable potential of this strategy if piggybackers know what to do (learn more here).

Now that that’s out of the way, we’re going to discuss the recent info surrounding Prudential Financial Inc (NYSE:PRU).

Hedge fund activity in Prudential Financial Inc (NYSE:PRU)

At the end of the second quarter, a total of 31 of the hedge funds we track were long in this stock, a change of -9% from the first quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly.

When using filings from the hedgies we track, Discovery Capital Management, managed by Rob Citrone, holds the biggest position in Prudential Financial Inc (NYSE:PRU). Discovery Capital Management has a $402.6 million position in the stock, comprising 4.3% of its 13F portfolio. The second largest stake is held by Ric Dillon of Diamond Hill Capital, with a $283.3 million position; 3.1% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Ken Griffin’s Citadel Investment Group, David Tepper’s Appaloosa Management LP and Peter Rathjens Bruce Clarke and John Campbell’s Arrowstreet Capital.

Due to the fact Prudential Financial Inc (NYSE:PRU) has witnessed declining interest from the smart money’s best and brightest, it’s easy to see that there was a specific group of money managers who were dropping their full holdings at the end of the second quarter. It’s worth mentioning that Jeffrey Tannenbaum’s Fir Tree said goodbye to the largest investment of the 450+ funds we key on, valued at about $96.2 million in stock. Jim Simons’s fund, Renaissance Technologies, also dropped its stock, about $79.7 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds at the end of the second quarter.

How are insiders trading Prudential Financial Inc (NYSE:PRU)?

Insider buying is particularly usable when the company in question has experienced transactions within the past 180 days. Over the latest half-year time period, Prudential Financial Inc (NYSE:PRU) has seen zero unique insiders purchasing, and 6 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 Prudential Financial Inc (NYSE:PRU). These stocks are Sun Life Financial Inc. (USA) (NYSE:SLF), Metlife Inc (NYSE:MET), Prudential Public Limited Company (ADR) (NYSE:PUK), Manulife Financial Corporation (USA) (NYSE:MFC), and ING Groep N.V. (ADR) (NYSE:ING). This group of stocks are the members of the life insurance industry and their market caps match PRU’s market cap.