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Emeritus Corporation (ESC): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

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Emeritus Corporation (NYSE:ESC) has seen an increase in enthusiasm from smart money recently.

If you’d ask most traders, hedge funds are perceived as worthless, old financial tools of years past. While there are over 8000 funds trading today, we at Insider Monkey look at the leaders of this group, close to 450 funds. It is widely believed that this group has its hands on the majority of the hedge fund industry’s total capital, and by monitoring their best investments, we have uncovered a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outpaced 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as key, positive insider trading sentiment is a second way to parse down the marketplace. Obviously, there are a number of stimuli for a corporate insider to get rid of shares of his or her company, but only one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the impressive potential of this method if investors understand what to do (learn more here).

Keeping this in mind, let’s take a peek at the key action regarding Emeritus Corporation (NYSE:ESC).

Hedge fund activity in Emeritus Corporation (NYSE:ESC)

At the end of the first quarter, a total of 30 of the hedge funds we track were bullish in this stock, a change of 88% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully.

Of the funds we track, John Khoury’s Long Pond Capital had the most valuable position in Emeritus Corporation (NYSE:ESC), worth close to $31.9 million, comprising 5.6% of its total 13F portfolio. Sitting at the No. 2 spot is Phill Gross and Robert Atchinson of Adage Capital Management, with a $21.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Clint Carlson’s Carlson Capital, Israel Englander’s Millennium Management and Jim Simons’s Renaissance Technologies.

As aggregate interest increased, key hedge funds have been driving this bullishness. Carlson Capital, managed by Clint Carlson, assembled the biggest position in Emeritus Corporation (NYSE:ESC). Carlson Capital had 19.3 million invested in the company at the end of the quarter. Sanford J. Colen’s Apex Capital also initiated a $11.1 million position during the quarter. The other funds with brand new ESC positions are SAC Subsidiary’s CR Intrinsic Investors, Alec Litowitz and Ross Laser’s Magnetar Capital, and Dmitry Balyasny’s Balyasny Asset Management.

How have insiders been trading Emeritus Corporation (NYSE:ESC)?

Bullish insider trading is at its handiest when the company in focus has seen transactions within the past half-year. Over the latest half-year time frame, Emeritus Corporation (NYSE:ESC) has seen zero unique insiders purchasing, and 18 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Emeritus Corporation (NYSE:ESC). These stocks are Brookdale Senior Living, Inc. (NYSE:BKD), Kindred Healthcare, Inc. (NYSE:KND), National HealthCare Corporation (NYSEAMEX:NHC), The Ensign Group, Inc. (NASDAQ:ENSG), and Capital Senior Living Corporation (NYSE:CSU). All of these stocks are in the long-term care facilities industry and their market caps are closest to ESC’s market cap.

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