This Metric Says You Are Smart to Sell Valeant Pharmaceuticals Intl Inc (NYSE:VRX)

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) investors should pay attention to a decrease in support from the world’s most elite money managers of late.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX)

To most stock holders, hedge funds are viewed as slow, old financial vehicles of years past. While there are over 8000 funds in operation at present, we at Insider Monkey look at the bigwigs of this group, close to 450 funds. It is estimated that this group oversees the lion’s share of the hedge fund industry’s total capital, and by monitoring their best equity investments, we have come up with a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually 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 outperformed the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Equally as beneficial, optimistic insider trading sentiment is a second way to break down the investments you’re interested in. As the old adage goes: there are lots of stimuli for an upper level exec 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 method if “monkeys” understand what to do (learn more here).

Consequently, it’s important to take a gander at the latest action regarding Valeant Pharmaceuticals Intl Inc (NYSE:VRX).

What does the smart money think about Valeant Pharmaceuticals Intl Inc (NYSE:VRX)?

Heading into 2013, a total of 34 of the hedge funds we track were long in this stock, a change of -17% from the third quarter. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes significantly.

Of the funds we track, ValueAct Capital, managed by Jeffrey Ubben, holds the biggest position in Valeant Pharmaceuticals Intl Inc (NYSE:VRX). ValueAct Capital has a $1.05 billion position in the stock, comprising 13.4% of its 13F portfolio. On ValueAct Capital’s heels is Glenn Greenberg of Brave Warrior Capital, with a $375 million position; the fund has 22.5% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Andreas Halvorsen’s Viking Global, David Cohen and Harold Levy’s Iridian Asset Management and Peter Adam Hochfelder’s Brahman Capital.

Judging by the fact that Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has witnessed bearish sentiment from hedge fund managers, logic holds that there is a sect of funds who sold off their entire stakes heading into 2013. Intriguingly, Lee Ainslie’s Maverick Capital dropped the largest position of the “upper crust” of funds we watch, comprising close to $58 million in stock.. Peter J. Eichler Jr.’s fund, Aletheia Research and Management, also said goodbye to its stock, about $26 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 7 funds heading into 2013.

How are insiders trading Valeant Pharmaceuticals Intl Inc (NYSE:VRX)?

Insider purchases made by high-level executives is particularly usable when the company we’re looking at has experienced transactions within the past six months. Over the last six-month time period, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has seen 4 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

With the results demonstrated by Insider Monkey’s time-tested strategies, retail investors must always keep an eye on hedge fund and insider trading sentiment, and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is no exception.

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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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