CareFusion Corporation (CFN): Hedge Funds and Insiders Are Bearish, What Should You Do?

Is CareFusion Corporation (NYSE:CFN) the right pick for your portfolio? Investors who are in the know are taking a bearish view. The number of bullish hedge fund positions decreased by 4 lately.

In today’s marketplace, there are a multitude of metrics investors can use to monitor the equity markets. A pair of the most underrated are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the S&P 500 by a healthy margin (see just how much).

Just as integral, bullish insider trading activity is a second way to break down the financial markets. There are plenty of stimuli for a bullish insider to cut shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this strategy if piggybackers know where to look (learn more here).

With these “truths” under our belt, let’s take a gander at the latest action encompassing CareFusion Corporation (NYSE:CFN).

What have hedge funds been doing with CareFusion Corporation (NYSE:CFN)?

In preparation for this quarter, a total of 27 of the hedge funds we track were bullish in this stock, a change of -13% from the first quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially.

Of the funds we track, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC had the largest position in CareFusion Corporation (NYSE:CFN), worth close to $175 million, accounting for 1.9% of its total 13F portfolio. On First Pacific Advisors LLC’s heels is Citadel Investment Group, managed by Ken Griffin, which held a $89.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Ricky Sandler’s Eminence Capital, Lee Ainslie’s Maverick Capital and Cliff Asness’s AQR Capital Management.

Due to the fact that CareFusion Corporation (NYSE:CFN) has witnessed declining sentiment from the smart money, logic holds that there was a specific group of fund managers who sold off their full holdings in Q1. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest investment of the 450+ funds we watch, comprising close to $143 million in stock.. Roberto Mignone’s fund, Bridger Management, also said goodbye to its stock, about $38.6 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 4 funds in Q1.

How are insiders trading CareFusion Corporation (NYSE:CFN)?

Insider trading activity, especially when it’s bullish, is at its handiest when the primary stock in question has experienced transactions within the past six months. Over the latest six-month time period, CareFusion Corporation (NYSE:CFN) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to CareFusion Corporation (NYSE:CFN). These stocks are Teleflex Incorporated (NYSE:TFX), Mindray Medical International Ltd (ADR) (NYSE:MR), The Cooper Companies, Inc. (NYSE:COO), DENTSPLY International Inc. (NASDAQ:XRAY), and C.R. Bard, Inc. (NYSE:BCR). This group of stocks are the members of the medical instruments & supplies industry and their market caps match CFN’s market cap.