Why It’s Smart to Buy Aetna Inc. (AET)
Aetna Inc. (NYSE:AET) is one of the most hyped healthcare companies out there. We're about to give you an actual empirical look at one indicator that can predict stock appreciation. It's a bit different from most bloggers' usual junk.
Now, according to many investors, hedge funds are perceived as overrated, outdated investment vehicles of a period lost to current times. Although there are more than 8,000 hedge funds trading in present day, Insider Monkey focuses on the elite of this club, close to 525 funds. It is assumed that this group controls the lion's share of the hedge fund industry's total assets, and by paying attention to their highest performing picks, we've formulated a number of investment strategies that have historically beaten the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 trumped the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).
Equally as necessary, positive insider trading activity is a second way to look at the investments you're interested in. There are a number of motivations for a corporate insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Several empirical studies have demonstrated the market-beating potential of this method if piggybackers know where to look (learn more here).
What's more, let's analyze the latest info for Aetna Inc. (NYSE:AET).
How are hedge funds trading Aetna Inc. (NYSE:AET)?
Heading into Q3, a total of 55 of the hedge funds we track were bullish in this stock, a change of 2% from the first quarter. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully.
When using filings from the hedgies we track, Greenlight Capital, managed by David Einhorn, holds the largest position in Aetna Inc. (NYSE:AET). Greenlight Capital has a $427.6 million position in the stock, comprising 8% of its 13F portfolio. The second largest stake is held by Paulson & Co, managed by John Paulson, which held a $413.4 million position; 2.9% of its 13F portfolio is allocated to the stock. Remaining hedgies that hold long positions include Barry Rosenstein's JANA Partners, Daniel S. Och's OZ Management and William B. Gray's Orbis Investment Management.
Consequently, certain money managers were leading the bulls' herd. Greenlight Capital, managed by David Einhorn, created the biggest position in Aetna Inc. (NYSE:AET). Greenlight Capital had 427.6 million invested in the company at the end of the quarter. John Paulson's Paulson & Co also made a $413.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Barry Rosenstein's JANA Partners, Daniel S. Och's OZ Management, and William B. Gray's Orbis Investment Management.
What have insiders been doing with Aetna Inc. (NYSE:AET)?
Insider buying made by high-level executives is at its handiest when the company in focus has seen transactions within the past half-year. Over the last half-year time period, Aetna Inc. (NYSE:AET) has experienced zero unique insiders purchasing, and 4 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 Aetna Inc. (NYSE:AET). These stocks are Express Scripts Holding Company (NASDAQ:ESRX), Coventry Health Care, Inc. (NYSE:CVH), Humana Inc (NYSE:HUM), WellPoint, Inc. (NYSE:WLP), and CIGNA Corporation (NYSE:CI). This group of stocks are in the health care plans industry and their market caps resemble AET's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
Express Scripts Holding Company (NASDAQ:ESRX)
Coventry Health Care, Inc. (NYSE:CVH)
Humana Inc (NYSE:HUM)
WellPoint, Inc. (NYSE:WLP)
CIGNA Corporation (NYSE:CI)
Using the returns demonstrated by Insider Monkey's tactics, regular investors should always watch hedge fund and insider trading sentiment, and Aetna Inc. (NYSE:AET) is an important part of this process.