Cerner Corporation (CERN): Are Hedge Funds Right About This Stock?

Is Cerner Corporation (NASDAQ:CERN) a good investment?

If you were to ask many of your peers, hedge funds are viewed as useless, outdated investment vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds with their doors open today, this site focuses on the elite of this group, around 525 funds. It is widely held that this group oversees the lion’s share of the smart money’s total capital, and by monitoring their highest performing stock picks, we’ve identified a few investment strategies that have historically outpaced the S&P 500. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we‘ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find the details here).

Just as necessary, optimistic insider trading activity is a second way to look at the stock market universe. There are a number of stimuli for an executive to downsize shares of his or her company, but just one, very obvious reason why they would buy. Plenty of academic studies have demonstrated the useful potential of this method if piggybackers know what to do (learn more here).

What’s more, let’s analyze the recent info surrounding Cerner Corporation (NASDAQ:CERN).

Hedge fund activity in Cerner Corporation (NASDAQ:CERN)

At the end of the second quarter, a total of 21 of the hedge funds we track were long in this stock, a change of 11% from the first quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably.

Out of the hedge funds we follow, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital had the largest position in Cerner Corporation (NASDAQ:CERN), worth close to $57.7 million, accounting for 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Phill Gross and Robert Atchinson of Adage Capital Management, with a $20.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds that are bullish include Brian Ashford-Russell and Tim Woolley’s Polar Capital, and Jonathon Jacobson’s Highfields Capital Management.

Consequently, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Cerner Corporation (NASDAQ:CERN). Arrowstreet Capital had 57.7 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $20.6 million investment in the stock during the quarter. The following funds were also among the new CERN investors: Brian Ashford-Russell and Tim Woolley’s Polar Capital, Matthew Knauer and Mina Faltas’s Nokota Management, and Jonathon Jacobson’s Highfields Capital Management.

Insider trading activity in Cerner Corporation (NASDAQ:CERN)

Legal insider trading, particularly when it’s bullish, is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the last 180-day time frame, Cerner Corporation (NASDAQ:CERN) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to Cerner Corporation (NASDAQ:CERN). These stocks are Quality Systems, Inc. (NASDAQ:QSII), MedAssets, Inc. (NASDAQ:MDAS), WebMD Health Corp. (NASDAQ:WBMD), Medidata Solutions Inc (NASDAQ:MDSO), and Allscripts Healthcare Solutions Inc (NASDAQ:MDRX). All of these stocks are in the healthcare information services industry and their market caps match CERN’s market cap.

Using the returns shown by Insider Monkey’s studies, regular investors should always pay attention to hedge fund and insider trading sentiment, and Cerner Corporation (NASDAQ:CERN) applies perfectly to this mantra.

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