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Hedge Funds Are Dumping CVS Caremark Corporation (NYSE:CVS)

CVS Caremark Corporation (NYSE:CVS) was in 45 hedge funds’ portfolio at the end of December. CVS has experienced a decrease in hedge fund interest in recent months. There were 46 hedge funds in our database with CVS holdings at the end of the previous quarter.

CVS Caremark Corporation (NYSE:CVS)

If you’d ask most stock holders, hedge funds are seen as slow, outdated financial vehicles of years past. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey hone in on the bigwigs of this club, around 450 funds. It is widely believed that this group oversees the lion’s share of the smart money’s total asset base, and by watching their best investments, we have figured out a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually 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 trumped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Just as integral, optimistic insider trading activity is a second way to parse down the financial markets. There are a number of stimuli for an executive to sell shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the impressive potential of this tactic if you understand what to do (learn more here).

With all of this in mind, we’re going to take a look at the latest action encompassing CVS Caremark Corporation (NYSE:CVS).

What have hedge funds been doing with CVS Caremark Corporation (NYSE:CVS)?

At year’s end, a total of 45 of the hedge funds we track were bullish in this stock, a change of -2% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably.

When looking at the hedgies we track, Ralph V. Whitworth’s Relational Investors had the biggest position in CVS Caremark Corporation (NYSE:CVS), worth close to $368 million billion, comprising 7.1% of its total 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which held a $349 million position; 0.3% of its 13F portfolio is allocated to the company. Some other hedge funds with similar optimism include Cliff Asness’s AQR Capital Management, Jim Simons’s Renaissance Technologies and Phill Gross and Robert Atchinson’s Adage Capital Management.

Judging by the fact that CVS Caremark Corporation (NYSE:CVS) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of money managers who sold off their entire stakes at the end of the year. Interestingly, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC dropped the largest position of the 450+ funds we key on, comprising close to $377 million in stock., and Robert Pohly of Samlyn Capital was right behind this move, as the fund dumped about $54 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds at the end of the year.

How have insiders been trading CVS Caremark Corporation (NYSE:CVS)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has seen transactions within the past 180 days. Over the last half-year time frame, CVS Caremark Corporation (NYSE:CVS) has seen 1 unique insiders buying, and 5 insider sales (see the details of insider trades here).

With the returns exhibited by our strategies, everyday investors should always pay attention to hedge fund and insider trading sentiment, and CVS Caremark Corporation (NYSE:CVS) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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