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PharMerica Corporation (PMC): Insiders Aren’t Crazy About It

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PharMerica Corporation (NYSE:PMC) has experienced an increase in enthusiasm from smart money in recent months.

In the eyes of most investors, hedge funds are assumed to be underperforming, outdated investment tools of years past. While there are more than 8000 funds trading today, we choose to focus on the masters of this club, close to 450 funds. Most estimates calculate that this group has its hands on the lion’s share of the hedge fund industry’s total asset base, and by monitoring their top equity investments, we have come up with a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum 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 outpaced the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

David Shaw

Just as important, optimistic insider trading sentiment is another way to break down the financial markets. There are a variety of stimuli for a bullish insider to drop shares of his or her company, but only one, very clear reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this tactic if investors understand where to look (learn more here).

Keeping this in mind, it’s important to take a glance at the latest action surrounding PharMerica Corporation (NYSE:PMC).

How are hedge funds trading PharMerica Corporation (NYSE:PMC)?

At year’s end, a total of 12 of the hedge funds we track held long positions in this stock, a change of 20% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly.

When looking at the hedgies we track, D. E. Shaw’s D E Shaw had the biggest position in PharMerica Corporation (NYSE:PMC), worth close to $11 million, accounting for less than 0.1%% of its total 13F portfolio. On D E Shaw’s heels is AQR Capital Management, managed by Cliff Asness, which held a $4.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds that are bullish include Jim Simons’s Renaissance Technologies, Jacob Gottlieb’s Visium Asset Management and Joel Greenblatt’s Gotham Asset Management.

Now, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in PharMerica Corporation (NYSE:PMC). Citadel Investment Group had 0.4 million invested in the company at the end of the quarter. Ken Gray and Steve Walsh’s Bryn Mawr Capital also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Neil Chriss’s Hutchin Hill Capital and Paul Tudor Jones’s Tudor Investment Corp.

Insider trading activity in PharMerica Corporation (NYSE:PMC)

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 frame, PharMerica Corporation (NYSE:PMC) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to PharMerica Corporation (NYSE:PMC). These stocks are China Jo Jo Drugstores Inc (NASDAQ:CJJD), GNC Holdings Inc (NYSE:GNC), Rite Aid Corporation (NYSE:RAD), China Nepstar Chain Drugstore Ltd.(ADR) (NYSE:NPD), and BioScrip Inc. (NASDAQ:BIOS). All of these stocks are in the drug stores industry and their market caps are closest to PMC’s market cap.

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