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Emergent Biosolutions Inc (EBS): Hedge Funds and Insiders Are Bearish, What Should You Do?

Emergent Biosolutions Inc (NYSE:EBS) was in 15 hedge funds’ portfolio at the end of the first quarter of 2013. EBS investors should pay attention to a decrease in hedge fund sentiment recently. There were 17 hedge funds in our database with EBS positions at the end of the previous quarter.

If you’d ask most market participants, hedge funds are viewed as slow, old financial vehicles of yesteryear. While there are over 8000 funds with their doors open today, we at Insider Monkey hone in on the crème de la crème of this group, about 450 funds. It is estimated that this group oversees the majority of the smart money’s total asset base, and by paying attention to their top picks, we have discovered a number of investment strategies that have historically beaten the S&P 500 index. 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as beneficial, bullish insider trading activity is a second way to parse down the marketplace. Just as you’d expect, there are a number of reasons for an upper level exec to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the useful potential of this method if investors know what to do (learn more here).

With these “truths” under our belt, we’re going to take a look at the recent action regarding Emergent Biosolutions Inc (NYSE:EBS).

Hedge fund activity in Emergent Biosolutions Inc (NYSE:EBS)

In preparation for this quarter, a total of 15 of the hedge funds we track were long in this stock, a change of -12% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully.

Emergent Biosolutions Inc (NYSE:EBS)Of the funds we track, Mark Kingdon’s Kingdon Capital had the most valuable position in Emergent Biosolutions Inc (NYSE:EBS), worth close to $13.6 million, comprising 0.6% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which held a $12.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedgies with similar optimism include D. E. Shaw’s D E Shaw, Kevin Kotler’s Broadfin Capital and Israel Englander’s Millennium Management.

Due to the fact that Emergent Biosolutions Inc (NYSE:EBS) has experienced bearish sentiment from the smart money, it’s easy to see that there is a sect of hedge funds that slashed their positions entirely in Q1. Intriguingly, SAC Subsidiary’s CR Intrinsic Investors said goodbye to the largest position of the 450+ funds we watch, comprising close to $5.8 million in stock., and Joel Greenblatt of Gotham Asset Management was right behind this move, as the fund said goodbye to about $2.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds in Q1.

How have insiders been trading Emergent Biosolutions Inc (NYSE:EBS)?

Insider buying is particularly usable when the company in question has seen transactions within the past half-year. Over the latest half-year time frame, Emergent Biosolutions Inc (NYSE:EBS) has experienced zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Emergent Biosolutions Inc (NYSE:EBS). These stocks are Sequenom, Inc. (NASDAQ:SQNM), Protalix BioTherapeutics Inc. (NYSEAMEX:PLX), Sangamo Biosciences, Inc. (NASDAQ:SGMO), ChemoCentryx Inc (NASDAQ:CCXI), and Hyperion Therapeutics Inc (NASDAQ:HPTX). This group of stocks are the members of the biotechnology industry and their market caps match EBS’s market cap.

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