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Is Akorn, Inc. (AKRX) Going to Burn These Hedge Funds?: Hi-Tech Pharmacal Co. (HITK), Sagent Pharmaceuticals Inc (SGNT)

Akorn, Inc. (NASDAQ:AKRX) was in 10 hedge funds’ portfolio at the end of December. AKRX has seen a decrease in hedge fund sentiment lately. There were 10 hedge funds in our database with AKRX holdings at the end of the previous quarter.

In the 21st century investor’s toolkit, there are tons of metrics shareholders can use to track Mr. Market. A pair of the most useful are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the top money managers can outclass the S&P 500 by a significant amount (see just how much).

Just as integral, bullish insider trading activity is another way to parse down the marketplace. Just as you’d expect, there are lots of motivations for a corporate insider to drop shares of his or her company, but only one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the impressive potential of this strategy if shareholders understand what to do (learn more here).

Keeping this in mind, let’s take a peek at the key action encompassing Akorn, Inc. (NASDAQ:AKRX).

How are hedge funds trading Akorn, Inc. (NASDAQ:AKRX)?

At the end of the fourth quarter, a total of 10 of the hedge funds we track were bullish in this stock, a change of 0% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably.

According to our comprehensive database, Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, holds the most valuable position in Akorn, Inc. (NASDAQ:AKRX). Sectoral Asset Management has a $10 million position in the stock, comprising 0.4% of its 13F portfolio. On Sectoral Asset Management’s heels is Van Schreiber of Bennett Lawrence Management, with a $10 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedgies that are bullish include Charles Clough’s Clough Capital Partners, James Dondero’s Highland Capital Management and Robert B. Gillam’s McKinley Capital Management.

Because Akorn, Inc. (NASDAQ:AKRX) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that elected to cut their full holdings at the end of the year. At the top of the heap, Louis Navellier’s Navellier & Associates dumped the biggest investment of the 450+ funds we track, valued at about $2 million in stock.. Mike Vranos’s fund, Ellington, also said goodbye to its stock, about $1 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with Akorn, Inc. (NASDAQ:AKRX)?

Insider purchases made by high-level executives is at its handiest when the company in focus has experienced transactions within the past half-year. Over the latest 180-day time period, Akorn, Inc. (NASDAQ:AKRX) has experienced 1 unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Akorn, Inc. (NASDAQ:AKRX). These stocks are Hi-Tech Pharmacal Co. (NASDAQ:HITK), Sagent Pharmaceuticals Inc (NASDAQ:SGNT), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP), and Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). All of these stocks are in the drugs – generic industry and their market caps resemble AKRX’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Hi-Tech Pharmacal Co. (NASDAQ:HITK) 11 0 5
Sagent Pharmaceuticals Inc (NASDAQ:SGNT) 11 0 1
Ligand Pharmaceuticals Inc. (NASDAQ:LGND) 5 6 1
Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) 22 0 5
Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) 12 0 8

With the results exhibited by our strategies, everyday investors should always watch hedge fund and insider trading activity, and Akorn, Inc. (NASDAQ:AKRX) shareholders fit into this picture quite nicely.

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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