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Hedge Funds Aren’t Crazy About Cerner Corporation (NASDAQ:CERN) Anymore – Medidata Solutions Inc (NASDAQ:MDSO), WebMD Health Corp. (NASDAQ:WBMD)

Cerner Corporation (NASDAQ:CERN) investors should be aware of a decrease in enthusiasm from smart money recently.

To most market participants, hedge funds are assumed to be underperforming, outdated financial tools of the past. While there are greater than 8000 funds in operation at present, we at Insider Monkey choose to focus on the masters of this group, around 450 funds. It is estimated that this group controls most of the hedge fund industry’s total asset base, and by watching their highest performing stock picks, we have come up with a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Cerner Corporation (NASDAQ:CERN)

Just as beneficial, positive insider trading sentiment is another way to parse down the world of equities. There are many stimuli for an insider to cut shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this method if you know what to do (learn more here).

With all of this in mind, it’s important to take a look at the recent action surrounding Cerner Corporation (NASDAQ:CERN).

How have hedgies been trading Cerner Corporation (NASDAQ:CERN)?

In preparation for this year, a total of 15 of the hedge funds we track were bullish in this stock, a change of -25% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully.

When looking at the hedgies we track, Arthur B Cohen and Joseph Healey’s Healthcor Management LP had the biggest position in Cerner Corporation (NASDAQ:CERN), worth close to $41 million, comprising 2.2% of its total 13F portfolio. The second largest stake is held by Phill Gross and Robert Atchinson of Adage Capital Management, with a $16 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Jonathon Jacobson’s Highfields Capital Management, Jim Simons’s Renaissance Technologies and Richard Driehaus’s Driehaus Capital.

Since Cerner Corporation (NASDAQ:CERN) has faced declining sentiment from hedge fund managers, logic holds that there were a few funds who sold off their full holdings heading into 2013. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest investment of the “upper crust” of funds we track, comprising about $8 million in stock., and Richard Schimel of Diamondback Capital was right behind this move, as the fund dumped about $3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 5 funds heading into 2013.

How are insiders trading Cerner Corporation (NASDAQ:CERN)?

Insider trading activity, especially when it’s bullish, is most useful when the company in focus has experienced transactions within the past 180 days. Over the last six-month time period, Cerner Corporation (NASDAQ:CERN) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Cerner Corporation (NASDAQ:CERN). These stocks are Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), Medidata Solutions Inc (NASDAQ:MDSO), WebMD Health Corp. (NASDAQ:WBMD), MedAssets, Inc. (NASDAQ:MDAS), and Quality Systems, Inc. (NASDAQ:QSII). This group of stocks are in the healthcare information services industry and their market caps resemble CERN’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) 34 5 2
Medidata Solutions Inc (NASDAQ:MDSO) 11 0 7
WebMD Health Corp. (NASDAQ:WBMD) 13 0 0
MedAssets, Inc. (NASDAQ:MDAS) 18 0 8
Quality Systems, Inc. (NASDAQ:QSII) 11 1 0

With the results demonstrated by Insider Monkey’s strategies, retail investors should always monitor hedge fund and insider trading sentiment, and Cerner Corporation (NASDAQ:CERN) 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 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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