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Hedge Funds Are Selling Universal American Corporation (UAM)

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Is it smart to be bullish on Universal American Corporation (NYSE:UAM)?

Now, according to many traders, hedge funds are perceived as delayed, outdated financial vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds in operation today, Insider Monkey focuses on the crème de la crème of this club, close to 525 funds. It is assumed that this group has its hands on the lion’s share of the smart money’s total assets, and by tracking their highest performing equity investments, we’ve formulated a few investment strategies that have historically outperformed the S&P 500. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per 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 trumped the S&P 500 index by 33 percentage points in 11 months (find the details here).

Equally as necessary, bullish insider trading sentiment is another way to analyze the stock market universe. Just as you’d expect, there are a number of reasons for an insider to downsize shares of his or her company, but only one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the market-beating potential of this tactic if investors understand what to do (learn more here).

Universal American Corporation

Thus, let’s discuss the latest info surrounding Universal American Corporation (NYSE:UAM).

What does the smart money think about Universal American Corporation (NYSE:UAM)?

At Q2’s end, a total of 14 of the hedge funds we track held long positions in this stock, a change of -22% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly.

When using filings from the hedgies we track, Perry Capital, managed by Richard Perry, holds the biggest position in Universal American Corporation (NYSE:UAM). Perry Capital has a $68.5 million position in the stock, comprising 1.8% of its 13F portfolio. Coming in second is Deerfield Management, managed by James E. Flynn, which held a $27.2 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other hedge funds with similar optimism include Charles Clough’s Clough Capital Partners, Ken Griffin’s Citadel Investment Group and Stephen DuBois’s Camber Capital Management.

Due to the fact Universal American Corporation (NYSE:UAM) has witnessed bearish sentiment from the smart money’s best and brightest, it’s safe to say that there was a specific group of fund managers who sold off their full holdings in Q1. Interestingly, Christopher MedlockáJames’s Partner Fund Management dropped the largest stake of the “upper crust” of funds we monitor, valued at about $4.4 million in stock. Barton Biggs’s fund, Traxis Partners, also cut its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 4 funds in Q1.

How have insiders been trading Universal American Corporation (NYSE:UAM)?

Legal insider trading, particularly when it’s bullish, is best served when the company we’re looking at has seen transactions within the past six months. Over the last six-month time period, Universal American Corporation (NYSE:UAM) has seen 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 Universal American Corporation (NYSE:UAM). These stocks are WellCare Health Plans, Inc. (NYSE:WCG), Centene Corp (NYSE:CNC), Health Net, Inc. (NYSE:HNT), Molina Healthcare, Inc. (NYSE:MOH), and Magellan Health Services Inc (NASDAQ:MGLN). This group of stocks are the members of the health care plans industry and their market caps are similar to UAM’s market cap.

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