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DURECT Corporation (DRRX): Hedge Funds and Insiders Are Bullish, What Should You Do?

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DURECT Corporation (NASDAQ:DRRX) has experienced an increase in hedge fund interest recently.

To most stock holders, hedge funds are assumed to be underperforming, outdated financial vehicles of years past. While there are over 8000 funds in operation at present, we look at the aristocrats of this group, close to 450 funds. Most estimates calculate that this group oversees the majority of all hedge funds’ total asset base, and by watching their best picks, we have spotted a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Kevin Kotler

Just as integral, positive insider trading sentiment is a second way to parse down the financial markets. Just as you’d expect, there are a number of incentives for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the impressive potential of this tactic if “monkeys” understand where to look (learn more here).

Consequently, let’s take a peek at the recent action surrounding DURECT Corporation (NASDAQ:DRRX).

Hedge fund activity in DURECT Corporation (NASDAQ:DRRX)

In preparation for this quarter, a total of 7 of the hedge funds we track were long in this stock, a change of 17% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully.

When looking at the hedgies we track, Jean-Marie Eveillard’s First Eagle Investment Management had the most valuable position in DURECT Corporation (NASDAQ:DRRX), worth close to $11.3 million, comprising less than 0.1%% of its total 13F portfolio. On First Eagle Investment Management’s heels is Kevin Kotler of Broadfin Capital, with a $6.5 million position; 1.4% of its 13F portfolio is allocated to the company. Remaining hedgies that are bullish include Stephen DuBois’s Camber Capital Management, John Osterweis’s Osterweis Capital Management and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners.

Now, key hedge funds were leading the bulls’ herd. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, created the most outsized position in DURECT Corporation (NASDAQ:DRRX). LMR Partners had 0.1 million invested in the company at the end of the quarter.

How are insiders trading DURECT Corporation (NASDAQ:DRRX)?

Bullish insider trading is particularly usable when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time frame, DURECT Corporation (NASDAQ:DRRX) has experienced 1 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to DURECT Corporation (NASDAQ:DRRX). These stocks are Pernix Therapeutics Holdings Inc (NASDAQ:PTX), Biodel Inc (NASDAQ:BIOD), POZEN Inc. (NASDAQ:POZN), Gentium S.p.A. (ADR) (NASDAQ:GENT), and MEI Pharma Inc (NASDAQ:MEIP). All of these stocks are in the drug manufacturers – other industry and their market caps match DRRX’s market cap.

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