Now May Be The Time To Sell Morgan Stanley (MS). Hedge Funds Are.
Hedge fund interest in Morgan Stanley (NYSE:MS) has fallen precipitously in recent months, and the stock is down over 4% since late last month. Is now the time to dump the investment banking and brokerage giant, and search for better bargains in the financial sector? Perhaps. Let's take a look at the details.
In today’s marketplace, there are a multitude of metrics investors can use to watch stocks. Two of the best are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the elite fund managers can outpace their index-focused peers by a very impressive margin (see just how much).
Just as crucial, optimistic insider trading activity is a second way to look at the financial markets. There are a number of stimuli for a bullish insider to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various academic studies have demonstrated the impressive potential of this tactic if piggybackers understand where to look (learn more here).
What's more, we're going to examine the recent info for Morgan Stanley (NYSE:MS).
What have hedge funds been doing with Morgan Stanley (NYSE:MS)?
At Q2's end, a total of 49 of the hedge funds we track were long in this stock, a change of -20% from the first quarter. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes considerably.
According to our 13F database, Eagle Capital Management, managed by Boykin Curry, holds the largest position in Morgan Stanley (NYSE:MS). Eagle Capital Management has a $723.3 million position in the stock, comprising 3.9% of its 13F portfolio. Sitting at the No. 2 spot is Pzena Investment Management, managed by Richard S. Pzena, which held a $324.2 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Ken Heebner's Capital Growth Management, Ric Dillon's Diamond Hill Capital and Daniel S. Och's OZ Management.
As Morgan Stanley (NYSE:MS) has faced dropping sentiment from upper-tier hedge fund managers, it's easy to see that there was a specific group of hedgies that decided to sell off their full holdings last quarter. It's worth mentioning that Louis Bacon's Moore Global Investments said goodbye to the largest investment of the 450+ funds we monitor, worth close to $98.6 million in stock, and Curtis Macnguyen of Ivory Capital (Investment Mgmt) was right behind this move, as the fund cut about $71.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 12 funds last quarter.
How have insiders been trading Morgan Stanley (NYSE:MS)?
Legal insider trading, particularly when it's bullish, is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time period, Morgan Stanley (NYSE:MS) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).
We'll also take a look at the relationship between both of these indicators in other stocks similar to Morgan Stanley (NYSE:MS). These stocks are LPL Financial Holdings Inc (NASDAQ:LPLA), TD Ameritrade Holding Corp. (NYSE:AMTD), CME Group Inc (NASDAQ:CME), Charles Schwab Corp (NYSE:SCHW), and Nomura Holdings, Inc. (ADR) (NYSE:NMR). This group of stocks are in the investment brokerage - national industry and their market caps match MS's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
LPL Financial Holdings Inc (NASDAQ:LPLA)
TD Ameritrade Holding Corp. (NYSE:AMTD)
CME Group Inc (NASDAQ:CME)
Charles Schwab Corp (NYSE:SCHW)
Nomura Holdings, Inc. (ADR) (NYSE:NMR)
Using the results explained by Insider Monkey's analyses, average investors should always watch hedge fund and insider trading activity, and Morgan Stanley (NYSE:MS) applies perfectly to this mantra.