Accuray Incorporated (ARAY): Insiders Are Buying, Should You?

Accuray Incorporated (NASDAQ:ARAY) was in 17 hedge funds’ portfolio at the end of the first quarter of 2013. ARAY has seen an increase in hedge fund interest in recent months. There were 15 hedge funds in our database with ARAY holdings at the end of the previous quarter.

According to most market participants, hedge funds are perceived as slow, outdated investment vehicles of the past. While there are over 8000 funds in operation at present, we choose to focus on the moguls of this group, around 450 funds. Most estimates calculate that this group oversees most of the smart money’s total capital, and by paying attention to their top investments, we have brought to light a few 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 started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as key, bullish insider trading activity is another way to break down the marketplace. Just as you’d expect, there are a variety of stimuli for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the valuable potential of this strategy if shareholders understand what to do (learn more here).

Keeping this in mind, we’re going to take a peek at the latest action regarding Accuray Incorporated (NASDAQ:ARAY).

How are hedge funds trading Accuray Incorporated (NASDAQ:ARAY)?

At the end of the first quarter, a total of 17 of the hedge funds we track were long in this stock, a change of 13% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings significantly.

Of the funds we track, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the biggest position in Accuray Incorporated (NASDAQ:ARAY). Adage Capital Management has a $19.7 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by John Burbank of Passport Capital, with a $18.6 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other peers that hold long positions include Chuck Royce’s Royce & Associates, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management and Israel Englander’s Millennium Management.

Consequently, specific money managers have jumped into Accuray Incorporated (NASDAQ:ARAY) headfirst. Royce & Associates, managed by Chuck Royce, created the most outsized position in Accuray Incorporated (NASDAQ:ARAY). Royce & Associates had 5.3 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management also made a $5.2 million investment in the stock during the quarter. The following funds were also among the new ARAY investors: Jay Venkatesen’s Ayer Capital Management, Jeffrey Vinik’s Vinik Asset Management, and D. E. Shaw’s D E Shaw.

What have insiders been doing with Accuray Incorporated (NASDAQ:ARAY)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company in question has seen transactions within the past 180 days. Over the last six-month time period, Accuray Incorporated (NASDAQ:ARAY) has seen 2 unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Accuray Incorporated (NASDAQ:ARAY). These stocks are GenMark Diagnostics, Inc (NASDAQ:GNMK), Natus Medical Inc (NASDAQ:BABY), Navidea Biopharmaceuticals Inc (NYSEAMEX:NAVB), Syneron Medical Ltd. (NASDAQ:ELOS), and PhotoMedex Inc (NASDAQ:PHMD). This group of stocks are the members of the medical appliances & equipment industry and their market caps are closest to ARAY’s market cap.