Cardinal Health, Inc. (NYSE:CAH) investors should pay attention to an increase in hedge fund interest in recent months.
In the eyes of most traders, hedge funds are viewed as unimportant, old financial tools of years past. While there are over 8000 funds trading today, we hone in on the masters of this group, close to 450 funds. It is widely believed that this group has its hands on the majority of the smart money’s total capital, and by paying attention to their best equity investments, we have uncovered a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Just as key, optimistic insider trading activity is another way to parse down the investments you’re interested in. Obviously, there are plenty of incentives for an insider to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many empirical studies have demonstrated the impressive potential of this tactic if you know what to do (learn more here).
With all of this in mind, it’s important to take a gander at the recent action surrounding Cardinal Health, Inc. (NYSE:CAH).
How are hedge funds trading Cardinal Health, Inc. (NYSE:CAH)?
In preparation for this quarter, a total of 42 of the hedge funds we track were long in this stock, a change of 31% from the first quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially.
When looking at the hedgies we track, Andreas Halvorsen’s Viking Global had the largest position in Cardinal Health, Inc. (NYSE:CAH), worth close to $73.2 million, comprising 0.4% of its total 13F portfolio. On Viking Global’s heels is Clint Carlson of Carlson Capital, with a $64.3 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Steven Cohen’s SAC Capital Advisors.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Visium Asset Management, managed by Jacob Gottlieb, established the most outsized call position in Cardinal Health, Inc. (NYSE:CAH). Visium Asset Management had 41.6 million invested in the company at the end of the quarter. Malcolm Fairbairn’s Ascend Capital also made a $20.8 million investment in the stock during the quarter. The other funds with brand new CAH positions are Stephen DuBois’s Camber Capital Management, James E. Flynn’s Deerfield Management, and Alexander Roepers’s Atlantic Investment Management.
What have insiders been doing with Cardinal Health, Inc. (NYSE:CAH)?
Insider trading activity, especially when it’s bullish, is best served when the primary stock in question has experienced transactions within the past half-year. Over the last six-month time frame, Cardinal Health, Inc. (NYSE:CAH) has experienced 1 unique insiders buying, and 8 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to Cardinal Health, Inc. (NYSE:CAH). These stocks are Omnicare, Inc. (NYSE:OCR), McKesson Corporation (NYSE:MCK), “, and AmerisourceBergen Corp. (NYSE:ABC). This group of stocks are the members of the drugs wholesale industry and their market caps are similar to CAH’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Omnicare, Inc. (NYSE:OCR)||27||0||0|
|McKesson Corporation (NYSE:MCK)||39||0||9|
|AmerisourceBergen Corp. (NYSE:ABC)||25||0||4|
With the results shown by the aforementioned studies, retail investors should always watch hedge fund and insider trading sentiment, and Cardinal Health, Inc. (NYSE:CAH) is no exception.