The Western Union Company (NYSE:WU) is on the receiving end of a series of unfavorable transactions today, involving its stock. Shares of the $9.99 billion provider of global payment services and money transfers have crumbled by 6.89% in trading today after the company was hit with a double whammy of negative news. Firstly was the news that PayPal, currently an eBay Inc (NASDAQ:EBAY) subsidiary, but soon to be its own standalone company, is poised to become a greater force to be reckoned with on the money transfer and payments front, after it announced its acquisition of Xoom Corp (NASDAQ:XOOM) after trading closed last night. Following that, Ashwin Shirvaikar, a Wall Street analyst at Citigroup, reported that the deal threatens the check to check component of Western Union’s business. He believes that a new combination of PayPal and Xoom would lead to higher competitive pressure on Western Union’s online operations, as Xoom would leverage PayPal’s existing customer base. In addition to that, earlier today, the stock of The Western Union Company (NYSE:WU) was downgraded by Evercore Partners to ‘Hold’ from ‘Buy’. So far this year, Western Union is still up by 6.18%, however this is lagging the industry average, which is 14.33%.

The smart money was growing bearish on Western Union heading into the previous quarter. A total of 26 of the hedge funds tracked by Insider Monkey were long in The Western Union Company (NYSE:WU) on March 31, with about $1.06 billion of managed money in the stock. That was a decrease from the 28 hedge funds with positions on December 31, and while the capital did increase from $939 million, it did not outpace the 16% gains of the stock during the period, suggesting there was some overall selling of shares.

Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith (and money) in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 80 percentage points, returning over 135% (see the details here).

In today’s marketplace there are plenty of metrics investors put to use to value their holdings. A pair of the best metrics are hedge fund and insider trading activity. The insiders’ activity in Western Union has been largely characterized by selling. Over the last three months, a net of 431,731 shares were sold, while no major acquisitions were completed. Diane Scott, the Chief Marketing Officer, headed the list of sellers among executives as she disposed of some 207,178 shares during this period.

Hedge fund activity in The Western Union Company (NYSE:WU)

With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully.

According to hedge fund intelligence website Insider Monkey, Abrams Capital Management, managed by David Abrams, holds the number one position in The Western Union Company (NYSE:WU). Abrams Capital Management has a $449.7 million position in the stock, which is made up of 21.61 million shares. Sitting at the number two spot is Winton Capital Management, managed by David Harding, which held 5.21 million shares worth $108.5 million. Other members of the smart money that are bullish consist of Joel Greenblatt’s Gotham Asset Management, Charles Clough’s Clough Capital Partners, and John Thaler’s JAT Capital Management.

Since The Western Union Company (NYSE:WU) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who were dropping their entire stakes by the end of the first quarter. It’s worth mentioning that Kenneth Tropin‘s Graham Capital Management dropped the biggest position of all the hedgies watched by Insider Monkey, valued at an estimated $3.4 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also cut its stock, about $2.6 million worth. These transactions are interesting, as total hedge fund interest was cut by two funds at the end of the first quarter.

Finally, combining the latest activity of insiders, the sentiment of hedge fund managers, and the opinion of analysts, we recommend staying away from the shares of The Western Union Company (NYSE:WU) in the near term.

Disclosure: None