This Metric Says You Are Smart to Buy Cambrex Corporation (NYSE:CBM)

Cambrex Corporation (NYSE:CBM) was in 14 hedge funds’ portfolio at the end of December. CBM investors should pay attention to an increase in hedge fund interest in recent months. There were 12 hedge funds in our database with CBM positions at the end of the previous quarter.

Chuck Royce

To most traders, hedge funds are assumed to be underperforming, old financial tools of years past. While there are over 8000 funds in operation at present, we at Insider Monkey choose to focus on the moguls of this group, about 450 funds. It is widely believed that this group controls most of all hedge funds’ total capital, and by monitoring their highest performing equity investments, we have unsheathed a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually 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 25 percentage points in 6.5 month (see the details here).

Just as key, bullish insider trading sentiment is a second way to break down the stock market universe. Just as you’d expect, there are plenty of incentives for a bullish insider to get rid of shares of his or her company, but only one, very clear reason why they would buy. Many academic studies have demonstrated the market-beating potential of this method if “monkeys” know what to do (learn more here).

With these “truths” under our belt, it’s important to take a look at the key action surrounding Cambrex Corporation (NYSE:CBM).

What have hedge funds been doing with Cambrex Corporation (NYSE:CBM)?

At the end of the fourth quarter, a total of 14 of the hedge funds we track held long positions in this stock, a change of 17% from the third quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the biggest position in Cambrex Corporation (NYSE:CBM). Royce & Associates has a $15 million position in the stock, comprising 0% of its 13F portfolio. Coming in second is Renaissance Technologies, managed by Jim Simons, which held a $6 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedgies that are bullish include Cliff Asness’s AQR Capital Management, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Jacob Gottlieb’s Visium Asset Management.

Consequently, key hedge funds have jumped into Cambrex Corporation (NYSE:CBM) headfirst. Visium Asset Management, managed by Jacob Gottlieb, assembled the biggest position in Cambrex Corporation (NYSE:CBM). Visium Asset Management had 2 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $2 million position during the quarter. The other funds with brand new CBM positions are Mike Vranos’s Ellington and Neil Chriss’s Hutchin Hill Capital.

How are insiders trading Cambrex Corporation (NYSE:CBM)?

Insider buying is most useful when the company in focus has seen transactions within the past half-year. Over the last 180-day time period, Cambrex Corporation (NYSE:CBM) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Cambrex Corporation (NYSE:CBM). These stocks are AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), Obagi Medical Products, Inc. (NASDAQ:OMPI), Vical Incorporated (NASDAQ:VICL), Osiris Therapeutics, Inc. (NASDAQ:OSIR), and Dyax Corp. (NASDAQ:DYAX). This group of stocks are in the biotechnology industry and their market caps resemble CBM’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) 7 4 6
Obagi Medical Products, Inc. (NASDAQ:OMPI) 7 0 0
Vical Incorporated (NASDAQ:VICL) 8 5 0
Osiris Therapeutics, Inc. (NASDAQ:OSIR) 1 1 3
Dyax Corp. (NASDAQ:DYAX) 11 0 3

With the results demonstrated by our research, retail investors must always monitor hedge fund and insider trading activity, and Cambrex Corporation (NYSE:CBM) applies perfectly to this mantra.

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