Hedge Funds Are Dumping Dendreon Corporation (DNDN): Achillion Pharmaceuticals, Inc. (ACHN), TESARO Inc (TSRO)

Dendreon Corporation (NASDAQ:DNDN) investors should pay attention to a decrease in support from the world’s most elite money managers recently.

Dendreon Corporation (NASDAQ:DNDN)If you’d ask most traders, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are over 8000 funds trading at present, we look at the moguls of this club, close to 450 funds. It is widely believed that this group controls most of all hedge funds’ total asset base, and by keeping an eye on their highest performing stock picks, we have come up with a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as beneficial, positive insider trading activity is a second way to parse down the financial markets. Obviously, there are plenty of incentives for an executive to drop shares of his or her company, but only one, very clear reason why they would initiate a purchase. Plenty of academic studies have demonstrated the valuable potential of this tactic if you know what to do (learn more here).

With all of this in mind, we’re going to take a glance at the latest action encompassing Dendreon Corporation (NASDAQ:DNDN).

What have hedge funds been doing with Dendreon Corporation (NASDAQ:DNDN)?

At year’s end, a total of 12 of the hedge funds we track held long positions in this stock, a change of -25% from the third quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes significantly.

Of the funds we track, Deerfield Management, managed by James E. Flynn, holds the most valuable position in Dendreon Corporation (NASDAQ:DNDN). Deerfield Management has a $34 million position in the stock, comprising 1.9% of its 13F portfolio. Coming in second is Jacob Gottlieb of Visium Asset Management, with a $24 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Samuel Isaly’s OrbiMed Advisors, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw.

Due to the fact that Dendreon Corporation (NASDAQ:DNDN) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds who sold off their entire stakes at the end of the year. It’s worth mentioning that Matt Sirovich and Jeremy Mindich’s Scopia Capital cut the biggest investment of the 450+ funds we watch, totaling about $12 million in stock., and Peter J. Eichler Jr. of Aletheia Research and Management was right behind this move, as the fund dumped about $10 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 4 funds at the end of the year.

How are insiders trading Dendreon Corporation (NASDAQ:DNDN)?

Insider purchases made by high-level executives is most useful when the company in question has experienced transactions within the past 180 days. Over the last six-month time frame, Dendreon Corporation (NASDAQ:DNDN) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Dendreon Corporation (NASDAQ:DNDN). These stocks are Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), TESARO Inc (NASDAQ:TSRO), Clovis Oncology Inc (NASDAQ:CLVS), China Biologic Products Inc (NASDAQ:CBPO), and InterMune Inc (NASDAQ:ITMN). This group of stocks are in the biotechnology industry and their market caps are similar to DNDN’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) 16 0 1
Clovis Oncology Inc (NASDAQ:CLVS) 7 0 1
China Biologic Products Inc (NASDAQ:CBPO) 2 0 1
InterMune Inc (NASDAQ:ITMN) 14 0 0

With the returns shown by Insider Monkey’s studies, retail investors must always monitor hedge fund and insider trading sentiment, and Dendreon Corporation (NASDAQ:DNDN) is no exception.

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