Is WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX) a good investment?
In the eyes of many of your fellow readers, hedge funds are perceived as useless, old investment vehicles of an era lost to time. Although there are more than 8,000 hedge funds with their doors open today, Insider Monkey aim at the leaders of this club, around 525 funds. Analysts calculate that this group has its hands on the majority of all hedge funds’ total assets, and by paying attention to their best investments, we’ve revealed a number of investment strategies that have historically outstripped the 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 beaten the S&P 500 index by 33 percentage points in 11 months (find the details here).
Just as necessary, optimistic insider trading activity is another way to look at the world of equities. As the old adage goes: there are a number of incentives for a bullish insider to sell shares of his or her company, but just one, very clear reason why they would initiate a purchase. Plenty of academic studies have demonstrated the useful potential of this strategy if investors understand what to do (learn more here).
Thus, it’s important to examine the recent info about WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX).
What does the smart money think about WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX)?
Heading into Q3, a total of 13 of the hedge funds we track were bullish in this stock, a change of 0% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully.
According to our 13F database, Tiger Management, managed by Julian Robertson, holds the biggest position in WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX). Tiger Management has a $18.7 million position in the stock, comprising 2.4% of its 13F portfolio. The second largest stake is held by Bloom Tree Partners, managed by Alok Agrawal, which held a $10.9 million position; 2.7% of its 13F portfolio is allocated to the stock. Some other hedge funds with similar optimism include D. E. Shaw’s D E Shaw, Robert B. Gillam’s McKinley Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors.
Since WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX) has witnessed declining interest from the top-tier hedge fund industry, we can see that there lies a certain “tier” of hedge funds who sold off their full holdings last quarter. Intriguingly, John Arnold’s Centaurus Advisors dropped the largest position of the 450+ funds we key on, valued at close to $2.3 million in stock, and Jacob Gottlieb of Visium Asset Management was right behind this move, as the fund dumped about $1.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Insider trading activity in WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX)
Legal insider trading, particularly when it’s bullish, is best served when the company we’re looking at has experienced transactions within the past 180 days. Over the last 180-day time period, WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
We’ll also take a look at the relationship between both of these indicators in other stocks similar to WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX). These stocks are Bio-Reference Laboratories Inc (NASDAQ:BRLI), Alere Inc (NYSE:ALR), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), ICON plc – Ordinary Shares (NASDAQ:ICLR), and Genomic Health, Inc. (NASDAQ:GHDX). This group of stocks are in the medical laboratories & research industry and their market caps resemble WX’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Bio-Reference Laboratories Inc (NASDAQ:BRLI)||10||0||0|
|Alere Inc (NYSE:ALR)||25||0||0|
|Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD)||14||0||0|
|ICON plc – Ordinary Shares (NASDAQ:ICLR)||20||0||0|
|Genomic Health, Inc. (NASDAQ:GHDX)||7||0||0|
Using the returns explained by our tactics, regular investors must always pay attention to hedge fund and insider trading activity, and WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX) shareholders fit into this picture quite nicely.