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Should You Avoid EXACT Sciences Corporation (NASDAQ:EXAS)? – Merrimack Pharmaceuticals Inc (NASDAQ:MACK), Array Biopharma Inc (NASDAQ:ARRY)

Is EXACT Sciences Corporation (NASDAQ:EXAS) ready to raly soon? Investors who are in the know are becoming less hopeful. The number of bullish hedge fund positions were trimmed by 6 recently.

EXACT Sciences Corporation (NASDAQ:EXAS)

If you’d ask most traders, hedge funds are perceived as worthless, old financial vehicles of the past. While there are over 8000 funds with their doors open at present, we at Insider Monkey hone in on the upper echelon of this club, around 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total asset base, and by tracking their best picks, we have spotted 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 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 trumped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Just as important, positive insider trading activity is a second way to parse down the financial markets. Just as you’d expect, there are many reasons for a corporate insider to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this method if investors know where to look (learn more here).

With all of this in mind, let’s take a look at the recent action encompassing EXACT Sciences Corporation (NASDAQ:EXAS).

How are hedge funds trading EXACT Sciences Corporation (NASDAQ:EXAS)?

At year’s end, a total of 11 of the hedge funds we track were long in this stock, a change of -35% from the third quarter. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly.

When looking at the hedgies we track, OrbiMed Advisors, managed by Samuel Isaly, holds the largest position in EXACT Sciences Corporation (NASDAQ:EXAS). OrbiMed Advisors has a $46 million position in the stock, comprising 1.4% of its 13F portfolio. On OrbiMed Advisors’s heels is D E Shaw, managed by D. E. Shaw, which held a $23 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedgies that are bullish include Mark Broach’s Manatuck Hill Partners, Joseph Edelman’s Perceptive Advisors and Jacob Gottlieb’s Visium Asset Management.

Due to the fact that EXACT Sciences Corporation (NASDAQ:EXAS) has witnessed a declination in interest from the smart money, it’s safe to say that there were a few hedgies that elected to cut their positions entirely at the end of the year. It’s worth mentioning that Jim Simons’s Renaissance Technologies dumped the largest investment of all the hedgies we monitor, comprising an estimated $2 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund said goodbye to about $2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 6 funds at the end of the year.

How are insiders trading EXACT Sciences Corporation (NASDAQ:EXAS)?

Insider trading activity, especially when it’s bullish, is most useful when the company in focus has experienced transactions within the past six months. Over the latest six-month time frame, EXACT Sciences Corporation (NASDAQ:EXAS) has experienced 2 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to EXACT Sciences Corporation (NASDAQ:EXAS). These stocks are Array Biopharma Inc (NASDAQ:ARRY), Cadence Pharmaceuticals, Inc. (NASDAQ:CADX), Merrimack Pharmaceuticals Inc (NASDAQ:MACK), Halozyme Therapeutics, Inc. (NASDAQ:HALO), and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). This group of stocks belong to the biotechnology industry and their market caps resemble EXAS’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Array Biopharma Inc (NASDAQ:ARRY) 15 0 1
Cadence Pharmaceuticals, Inc. (NASDAQ:CADX) 3 0 1
Merrimack Pharmaceuticals Inc (NASDAQ:MACK) 7 3 1
Halozyme Therapeutics, Inc. (NASDAQ:HALO) 12 2 0
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) 12 0 2

With the returns exhibited by the aforementioned research, retail investors should always keep an eye on hedge fund and insider trading sentiment, and EXACT Sciences Corporation (NASDAQ:EXAS) is no exception.

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