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Hedge Funds Aren’t Crazy About Brookdale Senior Living, Inc. (BKD) Anymore

Brookdale Senior Living, Inc. (NYSE:BKD) investors: listen up.

To many traders, hedge funds are seen as delayed, old investment vehicles of an era lost to time. Although there are more than 8,000 hedge funds with their doors open currently, this site looks at the leaders of this group, about 525 funds. Analysts calculate that this group has its hands on the majority of all hedge funds’ total assets, and by watching their highest quality stock picks, we’ve spotted a few investment strategies that have historically outperformed the S&P 500. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum 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 33 percentage points in 11 months (explore the details and some picks here).

Equally as key, positive insider trading sentiment is another way to look at the stock market universe. There are a variety of motivations for a corporate insider to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Many empirical studies have demonstrated the impressive potential of this method if “monkeys” know where to look (learn more here).

Thus, let’s examine the recent info about Brookdale Senior Living, Inc. (NYSE:BKD).

What does the smart money think about Brookdale Senior Living, Inc. (NYSE:BKD)?

Heading into Q3, a total of 33 of the hedge funds we track held long positions in this stock, a change of -11% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes substantially.

Brookdale Senior Living, Inc. (NYSE:BKD)When using filings from the hedgies we track, Fortress Investment Group, managed by Michael Novogratz, holds the most valuable position in Brookdale Senior Living, Inc. (NYSE:BKD). Fortress Investment Group has a $465.2 million position in the stock, comprising 11.6% of its 13F portfolio. The second largest stake is held by James Dinan of York Capital Management, with a $59.7 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include Donald Chiboucis’s Columbus Circle Investors, John Bader’s Halcyon Asset Management and Jim Simons’s Renaissance Technologies.

Since Brookdale Senior Living, Inc. (NYSE:BKD) has experienced declining interest from the top-tier hedge fund industry, it’s easy to see that there were a few funds who sold off their entire stakes heading into Q2. Interestingly, Daniel S. Och’s OZ Management sold off the largest position of all the hedgies we track, comprising close to $31.7 million in stock, and James Dondero of Highland Capital Management was right behind this move, as the fund cut about $21.5 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds heading into Q2.

How are insiders trading Brookdale Senior Living, Inc. (NYSE:BKD)?

Legal insider trading, particularly when it’s bullish, is best served when the primary stock in question has seen transactions within the past 180 days. Over the latest half-year time frame, Brookdale Senior Living, Inc. (NYSE:BKD) has seen zero unique insiders purchasing, and 12 insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Brookdale Senior Living, Inc. (NYSE:BKD). These stocks are Kindred Healthcare, Inc. (NYSE:KND), National HealthCare Corporation (NYSEAMEX:NHC), The Ensign Group, Inc. (NASDAQ:ENSG), Capital Senior Living Corporation (NYSE:CSU), and Emeritus Corporation (NYSE:ESC). All of these stocks are in the long-term care facilities industry and their market caps match BKD’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Kindred Healthcare, Inc. (NYSE:KND) 16 1 12
National HealthCare Corporation (NYSEAMEX:NHC) 5 0 4
The Ensign Group, Inc. (NASDAQ:ENSG) 8 0 4
Capital Senior Living Corporation (NYSE:CSU) 17 0 8
Emeritus Corporation (NYSE:ESC) 22 0 18

Using the results shown by our tactics, regular investors should always watch hedge fund and insider trading sentiment, and Brookdale Senior Living, Inc. (NYSE:BKD) shareholders fit into this picture quite nicely.

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