Do Hedge Funds and Insiders Love Incyte Corporation (NASDAQ:INCY)?

Incyte Corporation (NASDAQ:INCY) was in 15 hedge funds’ portfolio at the end of the fourth quarter of 2012. INCY has seen a decrease in support from the world’s most elite money managers in recent months. There were 18 hedge funds in our database with INCY holdings at the end of the previous quarter.

According to most market participants, hedge funds are seen as slow, outdated financial tools of the past. While there are over 8000 funds trading today, we look at the top tier of this group, close to 450 funds. It is estimated that this group controls the lion’s share of all hedge funds’ total asset base, and by watching their highest performing picks, we have unearthed a number of investment strategies that have historically outperformed the S&P 500 index. 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 started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Incyte Corporation (NASDAQ:INCY)Just as integral, bullish insider trading activity is another way to break down the stock market universe. Obviously, there are lots of incentives for an upper level exec to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Several academic studies have demonstrated the useful potential of this method if “monkeys” know what to do (learn more here).

With all of this in mind, let’s take a glance at the recent action regarding Incyte Corporation (NASDAQ:INCY).

What have hedge funds been doing with Incyte Corporation (NASDAQ:INCY)?

At the end of the fourth quarter, a total of 15 of the hedge funds we track were bullish in this stock, a change of -17% from the third quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially.

Of the funds we track, Julian Baker and Felix Baker’s Baker Bros. Advisors had the most valuable position in Incyte Corporation (NASDAQ:INCY), worth close to $246 million, accounting for 6.4% of its total 13F portfolio. Coming in second is Jerome Pfund and Michael Sjostrom of Sectoral Asset Management, with a $131 million position; 0% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Samuel Isaly’s OrbiMed Advisors, Jacob Gottlieb’s Visium Asset Management and Ken Griffin’s Citadel Investment Group.

Because Incyte Corporation (NASDAQ:INCY) has experienced bearish sentiment from the smart money, it’s easy to see that there was a specific group of hedgies that elected to cut their entire stakes last quarter. At the top of the heap, Stanley Druckenmiller’s Duquesne Capital sold off the biggest investment of the “upper crust” of funds we monitor, valued at close to $30 million in stock., and Sean Cullinan of Point State Capital was right behind this move, as the fund dumped about $16 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds last quarter.

How are insiders trading Incyte Corporation (NASDAQ:INCY)?

Bullish insider trading is at its handiest when the primary stock in question has seen transactions within the past 180 days. Over the last 180-day time frame, Incyte Corporation (NASDAQ:INCY) has experienced 1 unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Incyte Corporation (NASDAQ:INCY). These stocks are Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ), Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), Medivation Inc (NASDAQ:MDVN), Theravance Inc (NASDAQ:THRX), and Infinity Pharmaceuticals Inc. (NASDAQ:INFI). This group of stocks are the members of the biotechnology industry and their market caps resemble INCY’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ) 21 0 7
Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) 19 0 12
Medivation Inc (NASDAQ:MDVN) 29 0 5
Theravance Inc (NASDAQ:THRX) 10 1 1
Infinity Pharmaceuticals Inc. (NASDAQ:INFI) 22 0 2

With the returns shown by the aforementioned strategies, everyday investors must always pay attention to hedge fund and insider trading activity, and Incyte Corporation (NASDAQ:INCY) is no exception.

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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.