Should You Buy Impax Laboratories Inc (NASDAQ:IPXL)?

Is Impax Laboratories Inc (NASDAQ:IPXL) a buy right now? Prominent investors are taking a bullish view. The number of bullish hedge fund positions advanced by 3 recently.

Impax Laboratories Inc (NASDAQ:IPXL)

If you’d ask most shareholders, hedge funds are seen as slow, outdated financial vehicles of yesteryear. While there are over 8000 funds trading at present, we at Insider Monkey hone in on the moguls of this club, close to 450 funds. It is estimated that this group oversees the majority of the hedge fund industry’s total asset base, and by tracking their top equity investments, we have discovered a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually 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 outclassed the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Just as key, bullish insider trading activity is a second way to break down the world of equities. Just as you’d expect, there are a number of stimuli for an upper level exec to get rid of shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the useful potential of this method if investors know where to look (learn more here).

Consequently, it’s important to take a peek at the latest action encompassing Impax Laboratories Inc (NASDAQ:IPXL).

What have hedge funds been doing with Impax Laboratories Inc (NASDAQ:IPXL)?

Heading into 2013, a total of 14 of the hedge funds we track were long in this stock, a change of 27% from the third quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably.

According to our comprehensive database, Samuel Isaly’s OrbiMed Advisors had the largest position in Impax Laboratories Inc (NASDAQ:IPXL), worth close to $44 million, comprising 1.4% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which held a $12 million position; 2% of its 13F portfolio is allocated to the company. Other peers that hold long positions include Kevin Kotler’s Broadfin Capital, Steven Cohen’s SAC Capital Advisors and Israel Englander’s Millennium Management.

Now, some big names have been driving this bullishness. Bluefin Investment Management, managed by Scott Burney, created the largest position in Impax Laboratories Inc (NASDAQ:IPXL). Bluefin Investment Management had 5 million invested in the company at the end of the quarter. Mark Kingdon’s Kingdon Capital also initiated a $2 million position during the quarter. The other funds with new positions in the stock are Mark Kingdon’s Kingdon Capital, D. E. Shaw’s D E Shaw, and Cliff Asness’s AQR Capital Management.

Insider trading activity in Impax Laboratories Inc (NASDAQ:IPXL)

Insider buying is particularly usable when the company we’re looking at has experienced transactions within the past half-year. Over the last six-month time period, Impax Laboratories Inc (NASDAQ:IPXL) has experienced 3 unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Impax Laboratories Inc (NASDAQ:IPXL). These stocks are Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR), Pacira Pharmaceuticals Inc (NASDAQ:PCRX), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), and Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL). This group of stocks are in the drug manufacturers – major industry and their market caps are similar to IPXL’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) 14 3 1
Pacira Pharmaceuticals Inc (NASDAQ:PCRX) 9 0 9
Neurocrine Biosciences, Inc. (NASDAQ:NBIX) 12 0 1
Intercept Pharmaceuticals Inc (NASDAQ:ICPT) 6 3 0
Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) 15 0 0

With the returns exhibited by the aforementioned studies, everyday investors should always keep an eye on hedge fund and insider trading activity, and Impax Laboratories Inc (NASDAQ:IPXL) is an important part of this process.

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