AcelRx Pharmaceuticals Inc (ACRX): Insiders Are Buying, Should You?

Is AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) a first-rate investment today? Hedge funds are getting less optimistic. The number of long hedge fund bets stayed the same which is a slightly negative development in our experience

According to most stock holders, hedge funds are viewed as underperforming, old financial tools of yesteryear. While there are more than 8000 funds in operation today, we look at the masters of this group, about 450 funds. It is estimated that this group controls most of the smart money’s total capital, and by watching their best equity investments, we have formulated a number of investment strategies that have historically outpaced the broader indices. 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 topped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as important, optimistic insider trading sentiment is another way to parse down the financial markets. There are many incentives for an upper level exec to downsize shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the impressive potential of this tactic if you know where to look (learn more here).

With these “truths” under our belt, it’s important to take a look at the key action encompassing AcelRx Pharmaceuticals Inc (NASDAQ:ACRX).

How are hedge funds trading AcelRx Pharmaceuticals Inc (NASDAQ:ACRX)?

At Q1’s end, a total of 6 of the hedge funds we track were bullish in this stock, a change of 0% from the first quarter. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully.

Of the funds we track, Perceptive Advisors, managed by Joseph Edelman, holds the most valuable position in AcelRx Pharmaceuticals Inc (NASDAQ:ACRX). Perceptive Advisors has a $25.8 million position in the stock, comprising 3.1% of its 13F portfolio. Coming in second is Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk of GRT Capital Partners, with a $1.5 million position; 0.3% of its 13F portfolio is allocated to the company. Other peers that are bullish include Richard Driehaus’s Driehaus Capital, Israel Englander’s Millennium Management and John Osterweis’s Osterweis Capital Management.

Because AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) has witnessed a declination in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers who were dropping their positions entirely in Q1. At the top of the heap, Louis Bacon’s Moore Global Investments dropped the biggest investment of all the hedgies we watch, worth close to $0.6 million in stock., and Cliff Asness of AQR Capital Management was right behind this move, as the fund sold off about $0.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Insider trading activity in AcelRx Pharmaceuticals Inc (NASDAQ:ACRX)

Insider buying is at its handiest when the company in question has experienced transactions within the past 180 days. Over the latest half-year time period, AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) has experienced 1 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the returns demonstrated by Insider Monkey’s research, retail investors should always keep an eye on hedge fund and insider trading activity, and AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) applies perfectly to this mantra.

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