Is Lazard Ltd (LAZ) Going to Burn These Hedge Funds?
Should Lazard Ltd (NYSE:LAZ) investors track the following data?
To many traders, hedge funds are perceived as bloated, old financial vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds trading today, Insider Monkey aim at the crème de la crème of this club, about 525 funds. Analysts calculate that this group controls the majority of the hedge fund industry's total capital, and by tracking their highest performing picks, we've spotted a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Just as useful, positive insider trading sentiment is a second way to analyze the marketplace. Just as you'd expect, there are a number of incentives for an upper level exec to drop shares of his or her company, but only one, very clear reason why they would behave bullishly. Many empirical studies have demonstrated the useful potential of this strategy if investors understand what to do (learn more here).
Thus, let's examine the recent info surrounding Lazard Ltd (NYSE:LAZ).
How have hedgies been trading Lazard Ltd (NYSE:LAZ)?
At the end of the second quarter, a total of 12 of the hedge funds we track were long in this stock, a change of -37% from the previous quarter. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably.
According to our 13F database, John W. Rogers's Ariel Investments had the biggest position in Lazard Ltd (NYSE:LAZ), worth close to $221.3 million, comprising 3.6% of its total 13F portfolio. Sitting at the No. 2 spot is Nelson Peltz of Trian Partners, with a $215.5 million position; the fund has 4.2% of its 13F portfolio invested in the stock. Some other hedgies that are bullish include Chuck Royce's Royce & Associates, Ken Fisher's Fisher Asset Management and Joseph A. Jolson's Harvest Capital Strategies.
Due to the fact Lazard Ltd (NYSE:LAZ) has witnessed a fall in interest from the top-tier hedge fund industry, it's safe to say that there exists a select few hedgies who were dropping their full holdings heading into Q2. Intriguingly, Andrew Sandler's Sandler Capital Management sold off the largest stake of the "upper crust" of funds we key on, valued at close to $16.5 million in stock, and James Dondero of Highland Capital Management was right behind this move, as the fund dumped about $12 million worth. These transactions are interesting, as total hedge fund interest was cut by 7 funds heading into Q2.
What have insiders been doing with Lazard Ltd (NYSE:LAZ)?
Insider buying is at its handiest when the company in focus has seen transactions within the past half-year. Over the last half-year time period, Lazard Ltd (NYSE:LAZ) has experienced zero unique insiders purchasing, and zero 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 Lazard Ltd (NYSE:LAZ). These stocks are Waddell & Reed Financial, Inc. (NYSE:WDR), American Capital Ltd. (NASDAQ:ACAS), KKR & Co. L.P. (NYSE:KKR), Och-Ziff Capital Management Group LLC (NYSE:OZM), and Legg Mason, Inc. (NYSE:LM). All of these stocks are in the asset management industry and their market caps are similar to LAZ's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
Waddell & Reed Financial, Inc. (NYSE:WDR)
American Capital Ltd. (NASDAQ:ACAS)
KKR & Co. L.P. (NYSE:KKR)
Och-Ziff Capital Management Group LLC (NYSE:OZM)
Legg Mason, Inc. (NYSE:LM)
Using the returns demonstrated by our research, regular investors must always watch hedge fund and insider trading activity, and Lazard Ltd (NYSE:LAZ) applies perfectly to this mantra.