What Do Hedge Funds Think of ADT Corp (ADT)?

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Is ADT Corp (NYSE:ADT) worth your attention right now? The best stock pickers are reducing their bets on the stock. The number of bullish hedge fund positions shrunk by 6 lately. At the end of this article we will also compare ADT to other stocks including FireEye Inc (NASDAQ:FEYE), Edgewell Personal Care Company (NYSE:EPC), and Nuance Communications Inc. (NASDAQ:NUAN) to get a better sense of its popularity.

Keeping this in mind, we’re going to view the recent action regarding ADT Corp (NYSE:ADT).

Hedge fund activity in ADT Corp (NYSE:ADT)

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Wallace Weitz’s Wallace R. Weitz & Co. has the most valuable position in ADT Corp (NYSE:ADT), worth close to $42.7 million, corresponding to 1.3% of its total 13F portfolio. On Wallace R. Weitz & Co.’s heels is D E Shaw, with a $28.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions consist of Michael O’Keefe’s 12th Street Asset Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John A. Levin’s Levin Capital Strategies.

Because ADT Corp (NYSE:ADT) has witnessed bearish sentiment from the smart money, it’s safe to say that there is a sect of fund managers who sold off their positions entirely last quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management sold off the largest position of all the hedgies monitored by Insider Monkey, comprising close to $19.4 million in call options., and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $3.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 6 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to ADT Corp (NYSE:ADT). We will take a look at FireEye Inc (NASDAQ:FEYE), Edgewell Personal Care Company (NYSE:EPC), Nuance Communications Inc. (NASDAQ:NUAN), and Tegna Inc (NYSE:TGNA). This group of stocks’ market valuations are similar to ADT’s market valuation.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $825 million. That figure was $211 million in ADT’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Tegna Inc (NYSE:TGNA) is the least popular one with only 21 bullish hedge fund positions. ADT Corp (NYSE:ADT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FEYE might be a better candidate to consider a long position.