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Here is What Hedge Funds Think About Depomed Inc (DEPO): Synergy Pharmaceuticals Inc (SGYP), SciClone Pharmaceuticals, Inc. (SCLN)

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Is Depomed Inc (NASDAQ:DEPO) a first-rate investment today? Hedge funds are buying. The number of bullish hedge fund positions moved up by 4 recently.

Depomed Inc (NASDAQ:DEPO)According to most investors, hedge funds are seen as underperforming, outdated financial tools of the past. While there are greater than 8000 funds with their doors open today, we at Insider Monkey hone in on the moguls of this group, about 450 funds. Most estimates calculate that this group controls the lion’s share of all hedge funds’ total capital, and by monitoring their highest performing equity investments, we have discovered a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outstripped 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 topped the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Just as key, bullish insider trading sentiment is another way to break down the stock market universe. Just as you’d expect, there are plenty of stimuli for an upper level exec to sell shares of his or her company, but just one, very simple reason why they would buy. Various academic studies have demonstrated the market-beating potential of this tactic if shareholders understand where to look (learn more here).

Keeping this in mind, let’s take a peek at the latest action surrounding Depomed Inc (NASDAQ:DEPO).

How have hedgies been trading Depomed Inc (NASDAQ:DEPO)?

At the end of the fourth quarter, a total of 11 of the hedge funds we track held long positions in this stock, a change of 57% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings meaningfully.

Of the funds we track, Kevin Kotler’s Broadfin Capital had the most valuable position in Depomed Inc (NASDAQ:DEPO), worth close to $10.8 million, accounting for 2.7% of its total 13F portfolio. Coming in second is Deerfield Management, managed by James E. Flynn, which held a $7.3 million position; 0.4% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include SAC Subsidiary’s Sigma Capital Management, Gregory Fraser, Rudolph Kluiber, and Timothy Kroch’s GRT Capital Partners and Jacob Gottlieb’s Visium Asset Management.

As industrywide interest jumped, key money managers were leading the bulls’ herd. Sigma Capital Management, managed by SAC Subsidiary, initiated the biggest position in Depomed Inc (NASDAQ:DEPO). Sigma Capital Management had 2.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.1 million investment in the stock during the quarter. The following funds were also among the new DEPO investors: John Overdeck and David Siegel’s Two Sigma Advisors, Mike Vranos’s Ellington, and Ken Griffin’s Citadel Investment Group.

Insider trading activity in Depomed Inc (NASDAQ:DEPO)

Insider trading activity, especially when it’s bullish, is at its handiest when the company we’re looking at has experienced transactions within the past half-year. Over the latest six-month time frame, Depomed Inc (NASDAQ:DEPO) has seen 1 unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Depomed Inc (NASDAQ:DEPO). These stocks are Synergy Pharmaceuticals Inc (NASDAQ:SGYP), SciClone Pharmaceuticals, Inc. (NASDAQ:SCLN), Dynavax Technologies Corporation (NASDAQ:DVAX), Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP), and Lannett Company, Inc. (NYSEAMEX:LCI). This group of stocks belong to the drug manufacturers – other industry and their market caps resemble DEPO’s market cap.

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