ArthroCare Corporation (ARTC): Are Hedge Funds Right About This Stock?

ArthroCare Corporation (NASDAQ:ARTC) was in 23 hedge funds’ portfolio at the end of the first quarter of 2013. ARTC has experienced a decrease in hedge fund sentiment of late. There were 23 hedge funds in our database with ARTC positions at the end of the previous quarter.

At the moment, there are a multitude of metrics investors can use to watch their holdings. Some of the best are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the broader indices by a significant margin (see just how much).

Just as integral, positive insider trading activity is another way to parse down the investments you’re interested in. Just as you’d expect, there are a number of motivations for an upper level exec to get rid of shares of his or her company, but just one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the market-beating potential of this method if “monkeys” know what to do (learn more here).

With all of this in mind, it’s important to take a peek at the key action encompassing ArthroCare Corporation (NASDAQ:ARTC).

What have hedge funds been doing with ArthroCare Corporation (NASDAQ:ARTC)?

In preparation for this quarter, a total of 23 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly.

When looking at the hedgies we track, Arthur B Cohen and Joseph Healey’s Healthcor Management LP had the largest position in ArthroCare Corporation (NASDAQ:ARTC), worth close to $77.3 million, accounting for 3.4% of its total 13F portfolio. On Healthcor Management LP’s heels is Steven Cohen of SAC Capital Advisors, with a $39.2 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds that hold long positions include Sean Cullinan’s Point State Capital, Jim Simons’s Renaissance Technologies and Peter Kolchinsky’s RA Capital Management.

Judging by the fact that ArthroCare Corporation (NASDAQ:ARTC) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of hedge funds who sold off their entire stakes heading into Q2. Interestingly, Jacob Gottlieb’s Visium Asset Management sold off the largest position of the “upper crust” of funds we monitor, totaling an estimated $2.2 million in stock., and Jeffrey Vinik of Vinik Asset Management was right behind this move, as the fund dropped about $0.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Insider trading activity in ArthroCare Corporation (NASDAQ:ARTC)

Insider trading activity, especially when it’s bullish, is most useful when the company in focus has experienced transactions within the past 180 days. Over the latest half-year time frame, ArthroCare Corporation (NASDAQ:ARTC) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to ArthroCare Corporation (NASDAQ:ARTC). These stocks are Volcano Corporation (NASDAQ:VOLC), Masimo Corporation (NASDAQ:MASI), NuVasive, Inc. (NASDAQ:NUVA), Wright Medical Group Inc (NASDAQ:WMGI), and CONMED Corporation (NASDAQ:CNMD). This group of stocks belong to the medical appliances & equipment industry and their market caps are similar to ARTC’s market cap.

With the results shown by the aforementioned strategies, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and ArthroCare Corporation (NASDAQ:ARTC) shareholders fit into this picture quite nicely.

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