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NxStage Medical, Inc. (NXTM): Hedge Funds Are Bullish and Insiders Are Undecided, What Should You Do?

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To many of your peers, hedge funds are perceived as overrated, old investment tools of a period lost to current times. Although there are over 8,000 hedge funds in operation currently, Insider Monkey looks at the upper echelon of this club, around 525 funds. It is assumed that this group controls the lion’s share of the hedge fund industry’s total capital, and by paying attention to their best picks, we’ve discovered a number of investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a 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 outclassed the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

Equally as useful, bullish insider trading activity is a second way to analyze the financial markets. As the old adage goes: there are many incentives for an upper level exec to get rid of shares of his or her company, but just one, very clear reason why they would behave bullishly. Several empirical studies have demonstrated the market-beating potential of this tactic if shareholders know where to look (learn more here).

What’s more, it’s important to study the latest info surrounding NxStage Medical, Inc. (NASDAQ:NXTM).

Hedge fund activity in NxStage Medical, Inc. (NASDAQ:NXTM)

At the end of the second quarter, a total of 17 of the hedge funds we track were long in this stock, a change of 6% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably.

NxStage Medical, Inc. (NASDAQ:NXTM)When using filings from the hedgies we track, James E. Flynn’s Deerfield Management had the biggest position in NxStage Medical, Inc. (NASDAQ:NXTM), worth close to $55.8 million, accounting for 2.6% of its total 13F portfolio. On Deerfield Management’s heels is Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, which held a $50.8 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Samuel Isaly’s OrbiMed Advisors, Israel Englander’s Millennium Management and Charles Clough’s Clough Capital Partners.

As aggregate interest spiked, certain bigger names were breaking ground themselves. Deerfield Management, managed by James E. Flynn, created the most valuable position in NxStage Medical, Inc. (NASDAQ:NXTM). Deerfield Management had 55.8 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management also made a $50.8 million investment in the stock during the quarter. The following funds were also among the new NXTM investors: Samuel Isaly’s OrbiMed Advisors, Israel Englander’s Millennium Management, and Charles Clough’s Clough Capital Partners.

Insider trading activity in NxStage Medical, Inc. (NASDAQ:NXTM)

Insider buying is best served when the primary stock in question has seen transactions within the past half-year. Over the last six-month time frame, NxStage Medical, Inc. (NASDAQ:NXTM) 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 NxStage Medical, Inc. (NASDAQ:NXTM). These stocks are MAKO Surgical Corp. (NASDAQ:MAKO), ABIOMED, Inc. (NASDAQ:ABMD), Greatbatch Inc (NYSE:GB), Orthofix International NV (NASDAQ:OFIX), and The Spectranetics Corporation (NASDAQ:SPNC). This group of stocks are in the medical appliances & equipment industry and their market caps resemble NXTM’s market cap.

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