Cynosure, Inc. (NASDAQ:CYNO): Insiders Are Dumping, Should You? – Natus Medical Inc (NASDAQ:BABY), Systems Inc (NASDAQ:CSII)

Is Cynosure, Inc. (NASDAQ:CYNO) the right pick for your portfolio? Prominent investors are in a bullish mood. The number of bullish hedge fund positions inched up by 5 in recent months.

Cynosure, Inc. (NASDAQ:CYNO)

In the eyes of most stock holders, hedge funds are viewed as underperforming, outdated financial tools of years past. While there are greater than 8000 funds with their doors open today, we at Insider Monkey look at the moguls of this club, about 450 funds. It is estimated that this group has its hands on the majority of the smart money’s total capital, and by paying attention to their best stock picks, we have brought to light a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 (explore the details and some picks here).

Equally as beneficial, optimistic insider trading sentiment is a second way to parse down the world of equities. As the old adage goes: there are lots of incentives for a corporate insider to downsize shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this strategy if you know where to look (learn more here).

Keeping this in mind, let’s take a glance at the latest action surrounding Cynosure, Inc. (NASDAQ:CYNO).

What does the smart money think about Cynosure, Inc. (NASDAQ:CYNO)?

Heading into 2013, a total of 14 of the hedge funds we track were bullish in this stock, a change of 56% from the third quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully.

Of the funds we track, Alyeska Investment Group, managed by Anand Parekh, holds the largest position in Cynosure, Inc. (NASDAQ:CYNO). Alyeska Investment Group has a $8 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Driehaus Capital, managed by Richard Driehaus, which held a $4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Ken Grossman and Glen Schneider’s SG Capital Management, Jim Simons’s Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, established the largest position in Cynosure, Inc. (NASDAQ:CYNO). Alyeska Investment Group had 8 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider’s SG Capital Management also initiated a $3 million position during the quarter. The following funds were also among the new CYNO investors: Mike Vranos’s Ellington, Joseph Edelman’s Perceptive Advisors, and Joel Greenblatt’s Gotham Asset Management.

What have insiders been doing with Cynosure, Inc. (NASDAQ:CYNO)?

Bullish insider trading is at its handiest when the company in focus has seen transactions within the past half-year. Over the last half-year time frame, Cynosure, Inc. (NASDAQ:CYNO) has experienced zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Cynosure, Inc. (NASDAQ:CYNO). These stocks are Cardiovascular Systems Inc (NASDAQ:CSII), Natus Medical Inc (NASDAQ:BABY), Invacare Corporation (NYSE:IVC), Symmetry Medical Inc. (NYSE:SMA), and GenMark Diagnostics, Inc (NASDAQ:GNMK). All of these stocks are in the medical appliances & equipment industry and their market caps are closest to CYNO’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Cardiovascular Systems Inc (NASDAQ:CSII) 6 1 4
Natus Medical Inc (NASDAQ:BABY) 15 1 5
Invacare Corporation (NYSE:IVC) 14 0 0
Symmetry Medical Inc. (NYSE:SMA) 9 0 2
GenMark Diagnostics, Inc (NASDAQ:GNMK) 7 0 6

With the results shown by Insider Monkey’s tactics, retail investors should always monitor hedge fund and insider trading sentiment, and Cynosure, Inc. (NASDAQ:CYNO) shareholders fit into this picture quite nicely.

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Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.