Novadaq Technologies Inc. (NVDQ): How to Trade It?

Novadaq Technologies Inc. (NASDAQ:NVDQ) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately.

To most stock holders, hedge funds are viewed as unimportant, old investment vehicles of years past. While there are over 8000 funds trading at the moment, we look at the moguls of this group, close to 450 funds. It is widely believed that this group controls the lion’s share of the hedge fund industry’s total capital, and by watching their highest performing equity investments, we have discovered a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per 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 beaten the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Prem Watsa

Just as important, optimistic insider trading activity is a second way to parse down the investments you’re interested in. As the old adage goes: there are a variety of motivations for an executive to downsize shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this method if investors know where to look (learn more here).

With these “truths” under our belt, we’re going to take a peek at the latest action regarding Novadaq Technologies Inc. (NASDAQ:NVDQ).

What does the smart money think about Novadaq Technologies Inc. (NASDAQ:NVDQ)?

In preparation for this year, a total of 9 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully.

Of the funds we track, Fairfax Financial Holdings, managed by Prem Watsa, holds the most valuable position in Novadaq Technologies Inc. (NASDAQ:NVDQ). Fairfax Financial Holdings has a $17.4 million position in the stock, comprising 0.7% of its 13F portfolio. The second largest stake is held by Broadfin Capital, managed by Kevin Kotler, which held a $15.4 million position; 3.8% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Thomas Steyer’s Farallon Capital, Nathan Fischel’s DAFNA Capital Management and Richard Driehaus’s Driehaus Capital.

Since Novadaq Technologies Inc. (NASDAQ:NVDQ) has experienced a declination in interest from the smart money, we can see that there were a few money managers that elected to cut their positions entirely in Q4. It’s worth mentioning that Ranjan Tandon’s Libra Advisors cut the biggest stake of the “upper crust” of funds we track, totaling an estimated $4.4 million in stock., and Richard Schimel of Diamondback Capital was right behind this move, as the fund dropped about $1.6 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading Novadaq Technologies Inc. (NASDAQ:NVDQ)?

Insider buying is at its handiest when the company in focus has experienced transactions within the past six months. Over the latest half-year time period, Novadaq Technologies Inc. (NASDAQ:NVDQ) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Novadaq Technologies Inc. (NASDAQ:NVDQ). These stocks are TearLab Corporation (NASDAQ:TEAR), China Cord Blood Corp (NYSE:CO), Bio-Reference Laboratories Inc (NASDAQ:BRLI), Trius Therapeutics, Inc. (NASDAQ:TSRX), and Nordion Inc (USA) (NYSE:NDZ). This group of stocks belong to the medical laboratories & research industry and their market caps are closest to NVDQ’s market cap.