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This Metric Says You Are Smart to Sell Ariad Pharmaceuticals, Inc. (ARIA)

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In the eyes of many investors, hedge funds are seen as overrated, old financial tools of a forgotten age. Although there are over 8,000 hedge funds in operation today, this site aim at the masters of this club, about 525 funds. It is widely held that this group oversees most of the hedge fund industry’s total assets, and by tracking their highest quality equity investments, we’ve figured out a few investment strategies that have historically outstripped the S&P 500. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a 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 33 percentage points in 11 months (find the details here).

Equally as key, bullish insider trading activity is another way to analyze the stock market universe. Just as you’d expect, there are a number of motivations for an executive to downsize shares of his or her company, but just one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the useful potential of this strategy if “monkeys” know what to do (learn more here).

Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA)

Now that that’s out of the way, we’re going to discuss the latest info about Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA).

How have hedgies been trading Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA)?

Heading into Q3, a total of 17 of the hedge funds we track held long positions in this stock, a change of -43% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially.

According to our 13F database, Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, holds the biggest position in Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA). Sectoral Asset Management has a $92.6 million position in the stock, comprising 2.7% of its 13F portfolio. On Sectoral Asset Management’s heels is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $45.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Bill Miller’s Legg Mason Capital Management, Donald Chiboucis’s Columbus Circle Investors and Julian Baker and Felix Baker’s Baker Bros. Advisors.

Judging by the fact that Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) has witnessed declining interest from the top-tier hedge fund industry, it’s easy to see that there was a specific group of fund managers who were dropping their positions entirely last quarter. At the top of the heap, Dan Loeb’s Third Point said goodbye to the biggest position of the 450+ funds we track, totaling close to $49.7 million in stock. Van Schreiber’s fund, Bennett Lawrence Management, also cut its stock, about $7.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 13 funds last quarter.

Insider trading activity in Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA)

Insider buying is at its handiest when the primary stock in question has seen transactions within the past 180 days. Over the last half-year time period, Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA). These stocks are Theravance Inc (NASDAQ:THRX), Seattle Genetics, Inc. (NASDAQ:SGEN), Incyte Corporation (NASDAQ:INCY), Medivation Inc (NASDAQ:MDVN), and Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ). This group of stocks are in the biotechnology industry and their market caps resemble ARIA’s market cap.

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