ArthroCare Corporation (NASDAQ:ARTC) has experienced a decrease in hedge fund sentiment in recent months.
To most market participants, hedge funds are perceived as worthless, outdated investment vehicles of the past. While there are more than 8000 funds trading at present, we look at the top tier of this club, around 450 funds. Most estimates calculate that this group has its hands on most of the smart money's total asset base, and by tracking their best picks, we have discovered a few investment strategies that have historically outperformed Mr. Market. 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 trumped the S&P 500 index by 25 percentage points in 6.5 month (see the details here).
Just as important, positive insider trading sentiment is another way to parse down the financial markets. As the old adage goes: there are a variety of incentives for an upper level exec to cut shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various academic studies have demonstrated the useful potential of this strategy if investors know where to look (learn more here).
Consequently, let's take a look at the latest action regarding ArthroCare Corporation (NASDAQ:ARTC).
Heading into 2013, a total of 22 of the hedge funds we track held long positions in this stock, a change of 0% from one quarter earlier. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially.
Of the funds we track, Arthur B Cohen and Joseph Healey's Healthcor Management LP had the most valuable position in ArthroCare Corporation (NASDAQ:ARTC), worth close to $77 million, accounting for 4.2% of its total 13F portfolio. Sitting at the No. 2 spot is SAC Capital Advisors, managed by Steven Cohen, which held a $53 million position; 0% of its 13F portfolio is allocated to the company. Other hedgies that hold long positions include William Leland Edwards's Palo Alto Investors, Jay Venkatesen's Ayer Capital Management and Sean Cullinan's Point State Capital.
Due to the fact that ArthroCare Corporation (NASDAQ:ARTC) has witnessed declining sentiment from the smart money, logic holds that there were a few money managers who were dropping their entire stakes at the end of the year. Intriguingly, Malcolm Fairbairn's Ascend Capital said goodbye to the largest stake of the 450+ funds we key on, worth close to $5 million in stock.. Mike Vranos's fund, Ellington, also cut its stock, about $0 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Insider buying is at its handiest when the company in focus has seen transactions within the past half-year. Over the latest 180-day time period, ArthroCare Corporation (NASDAQ:ARTC) has experienced zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).
With the returns demonstrated by Insider Monkey's research, retail investors should always monitor hedge fund and insider trading sentiment, and ArthroCare Corporation (NASDAQ:ARTC) is no exception.
Insider Monkey's small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.