Is Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) a first-rate investment right now? Hedge funds are turning bullish. The number of bullish hedge fund bets improved by 3 in recent months.
To most stock holders, hedge funds are assumed to be unimportant, old financial vehicles of yesteryear. While there are more than 8000 funds trading at the moment, we at Insider Monkey hone in on the elite of this club, around 450 funds. It is estimated that this group controls most of the hedge fund industry’s total asset base, and by monitoring their highest performing equity investments, we have deciphered a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat 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 beaten the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).
Equally as important, positive insider trading sentiment is another way to parse down the marketplace. Just as you’d expect, there are plenty of motivations for a bullish insider to sell shares of his or her company, but only one, very obvious reason why they would behave bullishly. Several academic studies have demonstrated the valuable potential of this tactic if “monkeys” know what to do (learn more here).
With all of this in mind, we’re going to take a look at the recent action encompassing Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP).
How have hedgies been trading Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP)?
At the end of the fourth quarter, a total of 22 of the hedge funds we track were long in this stock, a change of 16% from the third quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly.
When looking at the hedgies we track, Rob Citrone’s Discovery Capital Management had the largest position in Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP), worth close to $89 million, accounting for 1.3% of its total 13F portfolio. Coming in second is SAC Capital Advisors, managed by Steven Cohen, which held a $62 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Jim Simons’s Renaissance Technologies, Mark Kingdon’s Kingdon Capital and Ken Griffin’s Citadel Investment Group.
As one would reasonably expect, some big names were breaking ground themselves. Kingdon Capital, managed by Mark Kingdon, established the most outsized position in Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP). Kingdon Capital had 14 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $14 million position during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Julian Baker and Felix Baker’s Baker Bros. Advisors, and Neil Chriss’s Hutchin Hill Capital.
Insider trading activity in Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP)
Bullish insider trading is particularly usable when the company in focus has seen transactions within the past six months. Over the latest half-year time frame, Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) has experienced zero unique insiders buying, and 5 insider sales (see the details of insider trades here).
With the returns shown by our time-tested strategies, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) is no exception.
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.