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Should You Avoid Magellan Health Services Inc (NASDAQ:MGLN)?

Magellan Health Services Inc (NASDAQ:MGLN) shareholders have witnessed a decrease in hedge fund sentiment recently.

Magellan Health Services Inc

To the average investor, there are tons of gauges investors can use to analyze publicly traded companies. Some of the most under-the-radar are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the elite fund managers can beat the market by a solid margin (see just how much).

Just as key, optimistic insider trading sentiment is another way to break down the financial markets. Obviously, there are lots of reasons for an upper level exec to downsize shares of his or her company, but just one, very obvious reason why they would buy. Several academic studies have demonstrated the useful potential of this method if “monkeys” understand what to do (learn more here).

With all of this in mind, we’re going to take a look at the latest action regarding Magellan Health Services Inc (NASDAQ:MGLN).

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

At the end of the fourth quarter, a total of 17 of the hedge funds we track were long in this stock, a change of -19% from the third quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly.

Of the funds we track, Jim Simons’s Renaissance Technologies had the largest position in Magellan Health Services Inc (NASDAQ:MGLN), worth close to $53 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by Steven Cohen of SAC Capital Advisors, with a $52 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Chuck Royce’s Royce & Associates, SAC Subsidiary’s CR Intrinsic Investors and Christopher MedlockáJames’s Partner Fund Management.

Judging by the fact that Magellan Health Services Inc (NASDAQ:MGLN) has experienced declining sentiment from the smart money, we can see that there lies a certain “tier” of fund managers who were dropping their positions entirely at the end of the year. Interestingly, Daniel S. Och’s OZ Management dropped the biggest stake of all the hedgies we track, worth close to $31 million in stock.. James E. Flynn’s fund, Deerfield Management, also said goodbye to its stock, about $19 million worth. These transactions are interesting, as total hedge fund interest fell by 4 funds at the end of the year.

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

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 180-day time period, Magellan Health Services Inc (NASDAQ:MGLN) has seen zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

With the results exhibited by our strategies, everyday investors should always monitor hedge fund and insider trading activity, and Magellan Health Services Inc (NASDAQ:MGLN) shareholders fit into this picture quite nicely.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

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.

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