Is athenahealth, Inc (NASDAQ:ATHN) an outstanding investment now? Prominent investors are selling. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience
According to most investors, hedge funds are perceived as worthless, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation at the moment, we hone in on the upper echelon of this group, about 450 funds. It is widely believed that this group oversees the lion's share of the smart money's total asset base, and by keeping an eye on their top equity investments, we have found a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outpaced 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 outclassed the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Equally as important, optimistic insider trading sentiment is another way to parse down the investments you're interested in. Obviously, there are a variety of incentives for an insider to get rid of 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 tactic if shareholders know where to look (learn more here).
Now, we're going to take a look at the key action surrounding athenahealth, Inc (NASDAQ:ATHN).
Heading into 2013, a total of 13 of the hedge funds we track were bullish in this stock, a change of 0% from one quarter earlier. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes meaningfully.
According to our comprehensive database, Christopher Lord's Criterion Capital had the most valuable position in athenahealth, Inc (NASDAQ:ATHN), worth close to $63 million, accounting for 3.4% of its total 13F portfolio. On Criterion Capital's heels is Robert Joseph Caruso of Select Equity Group, with a $26 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Joe DiMenna's ZWEIG DIMENNA PARTNERS, Ken Griffin's Citadel Investment Group and Drew Cupps's Cupps Capital Management.
Due to the fact that athenahealth, Inc (NASDAQ:ATHN) has witnessed a declination in interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of hedge funds that elected to cut their entire stakes last quarter. Interestingly, Donald Chiboucis's Columbus Circle Investors dropped the largest investment of all the hedgies we watch, comprising close to $16 million in stock., and Joseph Edelman of Perceptive Advisors was right behind this move, as the fund dumped about $9 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Insider buying is most useful when the primary stock in question has seen transactions within the past 180 days. Over the latest half-year time frame, athenahealth, Inc (NASDAQ:ATHN) has experienced zero unique insiders buying, and 4 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 athenahealth, Inc (NASDAQ:ATHN). These stocks are Vantiv Inc (NYSE:VNTV), MAXIMUS, Inc. (NYSE:MMS), WEX Inc (NYSE:WXS), Global Payments Inc (NYSE:GPN), and Rollins, Inc. (NYSE:ROL). This group of stocks are the members of the business services industry and their market caps match ATHN's market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Vantiv Inc (NYSE:VNTV)||17||0||7|
|MAXIMUS, Inc. (NYSE:MMS)||12||0||11|
|WEX Inc (NYSE:WXS)||5||0||10|
|Global Payments Inc (NYSE:GPN)||26||0||3|
|Rollins, Inc. (NYSE:ROL)||12||0||2|
With the returns exhibited by our studies, everyday investors should always watch hedge fund and insider trading activity, and athenahealth, Inc (NASDAQ:ATHN) shareholders fit into this picture quite nicely.