This Metric Says You Are Smart to Sell NxStage Medical, Inc. (NASDAQ:NXTM)

NxStage Medical, Inc. (NASDAQ:NXTM) was in 17 hedge funds’ portfolio at the end of December. NXTM has experienced a decrease in hedge fund interest of late. There were 20 hedge funds in our database with NXTM positions at the end of the previous quarter.


If you’d ask most investors, hedge funds are seen as slow, old investment vehicles of years past. While there are greater than 8000 funds in operation at present, we at Insider Monkey choose to focus on the moguls of this group, around 450 funds. Most estimates calculate that this group has its hands on most of the smart money’s total asset base, and by tracking their highest performing stock picks, we have spotted a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Just as important, bullish insider trading activity is a second way to parse down the world of equities. As the old adage goes: there are a number of incentives for an upper level exec to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this tactic if “monkeys” know what to do (learn more here).

Now, we’re going to take a gander at the latest action encompassing NxStage Medical, Inc. (NASDAQ:NXTM).

Hedge fund activity in NxStage Medical, Inc. (NASDAQ:NXTM)

Heading into 2013, a total of 17 of the hedge funds we track were bullish in this stock, a change of -15% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably.

Of the funds we track, James E. Flynn’s Deerfield Management had the largest position in NxStage Medical, Inc. (NASDAQ:NXTM), worth close to $65 million, accounting for 3.6% of its total 13F portfolio. Coming in second is Samuel Isaly of OrbiMed Advisors, with a $34 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Jérôme Pfund and Michael Sjöström’s Sectoral Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Charles Clough’s Clough Capital Partners.

Seeing as NxStage Medical, Inc. (NASDAQ:NXTM) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of money managers who sold off their full holdings in Q4. Interestingly, SAC Subsidiary’s Sigma Capital Management dumped the biggest stake of the 450+ funds we track, valued at an estimated $3 million in stock., and John Burbank of Passport Capital was right behind this move, as the fund dropped about $2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds in Q4.

Insider trading activity in NxStage Medical, Inc. (NASDAQ:NXTM)

Insider purchases made by high-level executives is particularly usable when the company in question has seen transactions within the past six months. Over the latest six-month time frame, NxStage Medical, Inc. (NASDAQ:NXTM) has experienced zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

With the returns demonstrated by our strategies, everyday investors should always pay attention to hedge fund and insider trading activity, and NxStage Medical, Inc. (NASDAQ:NXTM) applies perfectly to this mantra.

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