Should You Buy CAS Medical Systems Inc (CASM)?

Is CAS Medical Systems Inc (NASDAQ:CASM) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Hedge fund interest in CAS Medical Systems Inc (NASDAQ:CASM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CASM to other stocks, including Goodrich Petroleum Corporation (NYSE:GDP), Discovery Laboratories, Inc. (NASDAQ:DSCO), and Alphatec Holdings Inc (NASDAQ:ATEC) to get a better sense of its popularity.

At the moment there are dozens of formulas investors have at their disposal to grade publicly traded companies. Two of the most underrated formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top money managers can trounce the S&P 500 by a healthy margin (see the details here).

With all of this in mind, we’re going to view the recent action regarding CAS Medical Systems Inc (NASDAQ:CASM).

What have hedge funds been doing with CAS Medical Systems Inc (NASDAQ:CASM)?

Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, James E. Flynn’s Deerfield Management has the largest position in CAS Medical Systems Inc (NASDAQ:CASM), worth close to $4 million, accounting for 0.2% of its total 13F portfolio. The second most bullish fund manager is Broadfin Capital, led by Kevin Kotler, holding a $3.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. The remaining members of the smart money that hold long positions contain Adam Usdan’s Trellus Management Company, Jim Simons’ Renaissance Technologies, and Nathan Fischel’s DAFNA Capital Management.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks similar to CAS Medical Systems Inc (NASDAQ:CASM). We will take a look at Goodrich Petroleum Corporation (NYSE:GDP), Discovery Laboratories, Inc. (NASDAQ:DSCO), Alphatec Holdings Inc (NASDAQ:ATEC), and Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE). This group of stocks’ market valuations resemble CASM’s market valuation.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $8 million in CASM’s case. Goodrich Petroleum Corporation (NYSE:GDP) is the most popular stock in this table, while Alphatec Holdings Inc (NASDAQ:ATEC) is the least popular one with only 4 bullish hedge fund positions. CAS Medical Systems Inc (NASDAQ:CASM) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GDP might be a better candidate to consider a long position.