Merit Medical Systems, Inc. (MMSI): Hedge Funds and Insiders Are Bearish, What Should You Do?

Merit Medical Systems, Inc. (NASDAQ:MMSI) was in 11 hedge funds’ portfolio at the end of the first quarter of 2013. MMSI has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 13 hedge funds in our database with MMSI holdings at the end of the previous quarter.

Merit Medical Systems, Inc. (NASDAQ:MMSI)To most market participants, hedge funds are assumed to be slow, old investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, we look at the crème de la crème of this group, around 450 funds. It is widely believed that this group oversees the majority of the hedge fund industry’s total asset base, and by monitoring their best investments, we have formulated a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 outpaced the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as important, bullish insider trading sentiment is another way to break down the financial markets. Obviously, there are plenty of reasons for an insider to drop shares of his or her company, but only one, very clear reason why they would behave bullishly. Many empirical studies have demonstrated the useful potential of this method if investors understand what to do (learn more here).

With all of this in mind, we’re going to take a look at the recent action encompassing Merit Medical Systems, Inc. (NASDAQ:MMSI).

How are hedge funds trading Merit Medical Systems, Inc. (NASDAQ:MMSI)?

In preparation for this quarter, a total of 11 of the hedge funds we track were long in this stock, a change of -15% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially.

Of the funds we track, Chuck Royce’s Royce & Associates had the most valuable position in Merit Medical Systems, Inc. (NASDAQ:MMSI), worth close to $21.8 million, accounting for 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Kevin Kotler of Broadfin Capital, with a $11.2 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners.

Due to the fact that Merit Medical Systems, Inc. (NASDAQ:MMSI) has faced a declination in interest from the smart money, it’s safe to say that there were a few hedge funds who were dropping their entire stakes in Q1. Interestingly, SAC Subsidiary’s Sigma Capital Management sold off the biggest investment of the 450+ funds we track, valued at an estimated $0.4 million in stock., and Steven Cohen of SAC Capital Advisors was right behind this move, as the fund dropped about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds in Q1.

How have insiders been trading Merit Medical Systems, Inc. (NASDAQ:MMSI)?

Insider purchases made by high-level executives is most useful when the company in focus has experienced transactions within the past half-year. Over the last 180-day time frame, Merit Medical Systems, Inc. (NASDAQ:MMSI) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the returns shown by our strategies, retail investors must always keep an eye on hedge fund and insider trading activity, and Merit Medical Systems, Inc. (NASDAQ:MMSI) applies perfectly to this mantra.

Click here to learn why you should track hedge funds