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This Metric Says You Are Smart to Buy Hospira, Inc. (NYSE:HSP)

Hospira, Inc. (NYSE:HSP) was in 24 hedge funds’ portfolio at the end of December. HSP investors should pay attention to an increase in enthusiasm from smart money of late. There were 19 hedge funds in our database with HSP holdings at the end of the previous quarter.

Hospira, Inc. (NYSE:HSP)

In the eyes of most traders, hedge funds are assumed to be unimportant, old investment tools of years past. While there are greater than 8000 funds in operation today, we at Insider Monkey look at the masters of this group, close to 450 funds. It is estimated that this group controls the majority of all hedge funds’ total capital, and by paying attention to their highest performing equity investments, we have come up with a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Equally as important, optimistic insider trading activity is a second way to break down the stock market universe. As the old adage goes: there are plenty of motivations for an insider to sell shares of his or her company, but just one, very simple reason why they would behave bullishly. Many empirical studies have demonstrated the impressive potential of this tactic if investors understand what to do (learn more here).

With these “truths” under our belt, let’s take a look at the recent action surrounding Hospira, Inc. (NYSE:HSP).

How have hedgies been trading Hospira, Inc. (NYSE:HSP)?

In preparation for this year, a total of 24 of the hedge funds we track held long positions in this stock, a change of 26% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings considerably.

Of the funds we track, Ariel Investments, managed by John W. Rogers, holds the most valuable position in Hospira, Inc. (NYSE:HSP). Ariel Investments has a $100 million position in the stock, comprising 2.1% of its 13F portfolio. The second largest stake is held by Larry Robbins of Glenview Capital, with a $100 million position; 0.6% of its 13F portfolio is allocated to the stock. Other peers that are bullish include Thomas Ellis and Todd Hammer’s North Run Capital, Frank Brosens’s Taconic Capital and D. E. Shaw’s D E Shaw.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Ascend Capital, managed by Malcolm Fairbairn, initiated the biggest position in Hospira, Inc. (NYSE:HSP). Ascend Capital had 14 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $6 million position during the quarter. The following funds were also among the new HSP investors: Neil Chriss’s Hutchin Hill Capital, Curtis Macnguyen’s Ivory Capital (Investment Mgmt), and David Harding’s Winton Capital Management.

How have insiders been trading Hospira, Inc. (NYSE:HSP)?

Insider buying is at its handiest when the primary stock in question has experienced transactions within the past six months. Over the last six-month time period, Hospira, Inc. (NYSE:HSP) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

With the returns exhibited by our research, everyday investors should always keep an eye on hedge fund and insider trading activity, and Hospira, Inc. (NYSE:HSP) 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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