Charles River Laboratories (CRL): Insiders Aren’t Crazy About It

Charles River Laboratories (NYSE:CRL) investors should pay attention to a decrease in hedge fund interest in recent months.

In the eyes of most market participants, hedge funds are perceived as underperforming, outdated financial tools of the past. While there are more than 8000 funds with their doors open at present, we at Insider Monkey choose to focus on the elite of this group, around 450 funds. Most estimates calculate that this group controls most of the hedge fund industry’s total asset base, and by paying attention to their top investments, we have identified a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year 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 trumped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as important, positive insider trading activity is another way to parse down the financial markets. Obviously, there are many motivations for an insider to downsize shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this strategy if piggybackers know what to do (learn more here).

With these “truths” under our belt, let’s take a glance at the recent action surrounding Charles River Laboratories (NYSE:CRL).

What have hedge funds been doing with Charles River Laboratories (NYSE:CRL)?

Heading into Q2, a total of 21 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully.

When looking at the hedgies we track, Ariel Investments, managed by John W. Rogers, holds the largest position in Charles River Laboratories (NYSE:CRL). Ariel Investments has a $122.3 million position in the stock, comprising 2.1% of its 13F portfolio. Coming in second is Renaissance Technologies, managed by Jim Simons, which held a $63.9 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include David Dreman’s Dreman Value Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Cliff Asness’s AQR Capital Management.

Because Charles River Laboratories (NYSE:CRL) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their full holdings last quarter. Intriguingly, Barton Biggs’s Traxis Partners dumped the biggest position of the “upper crust” of funds we track, valued at close to $1.6 million in stock.. Mike Vranos’s fund, Ellington, also dropped its stock, about $0.6 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Charles River Laboratories (NYSE:CRL)?

Insider trading activity, especially when it’s bullish, is particularly usable when the primary stock in question has seen transactions within the past six months. Over the latest half-year time frame, Charles River Laboratories (NYSE:CRL) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Charles River Laboratories (NYSE:CRL). These stocks are Viropharma Inc (NASDAQ:VPHM), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Questcor Pharmaceuticals Inc (NASDAQ:QCOR), Theravance Inc (NASDAQ:THRX), and Infinity Pharmaceuticals Inc. (NASDAQ:INFI). This group of stocks belong to the biotechnology industry and their market caps resemble CRL’s market cap.

With the results shown by the aforementioned tactics, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Charles River Laboratories (NYSE:CRL) applies perfectly to this mantra.

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