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Should You Avoid Magellan Health Services Inc (MGLN)?

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Magellan Health Services Inc (NASDAQ:MGLN) was in 17 hedge funds’ portfolio at the end of March. MGLN has seen a decrease in hedge fund sentiment lately. There were 18 hedge funds in our database with MGLN positions at the end of the previous quarter.

Magellan Health Services Inc (NASDAQ:MGLN)

In the eyes of most market participants, hedge funds are perceived as worthless, outdated financial tools of years past. While there are more than 8000 funds with their doors open at present, we choose to focus on the aristocrats of this club, close to 450 funds. It is estimated that this group controls the majority of all hedge funds’ total capital, and by watching their highest performing picks, we have come up with a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as integral, optimistic insider trading activity is another way to break down the financial markets. As the old adage goes: there are a number of incentives for an executive to drop shares of his or her company, but only one, very clear reason why they would initiate a purchase. Many empirical studies have demonstrated the impressive potential of this tactic if investors know where to look (learn more here).

Consequently, we’re going to take a look at the recent action surrounding Magellan Health Services Inc (NASDAQ:MGLN).

What does the smart money think about Magellan Health Services Inc (NASDAQ:MGLN)?

At the end of the first quarter, a total of 17 of the hedge funds we track were long in this stock, a change of -6% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially.

Of the funds we track, Royce & Associates, managed by Chuck Royce, holds the biggest position in Magellan Health Services Inc (NASDAQ:MGLN). Royce & Associates has a $61.7 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which held a $53.7 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedgies that hold long positions include Steven Cohen’s SAC Capital Advisors, Paul Reeder and Edward Shapiro’s PAR Capital Management and Stephen DuBois’s Camber Capital Management.

Seeing as Magellan Health Services Inc (NASDAQ:MGLN) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds who sold off their entire stakes heading into Q2. At the top of the heap, SAC Subsidiary’s CR Intrinsic Investors dumped the largest position of the “upper crust” of funds we monitor, valued at an estimated $10.9 million in stock., and Christopher Medlock James of Partner Fund Management was right behind this move, as the fund cut about $8.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q2.

What do corporate executives and insiders think about Magellan Health Services Inc (NASDAQ:MGLN)?

Insider trading activity, especially when it’s bullish, is best served when the primary stock in question has seen transactions within the past 180 days. Over the last 180-day time period, Magellan Health Services Inc (NASDAQ:MGLN) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Magellan Health Services Inc (NASDAQ:MGLN). These stocks are WellCare Health Plans, Inc. (NYSE:WCG), Universal American Corporation (NYSE:UAM), Centene Corp (NYSE:CNC), Health Net, Inc. (NYSE:HNT), and Molina Healthcare, Inc. (NYSE:MOH). This group of stocks are in the health care plans industry and their market caps are similar to MGLN’s market cap.

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