Eli Lilly & Co. (LLY): Hedge Funds and Insiders Are Bearish, What Should You Do?

Eli Lilly & Co. (NYSE:LLY) was in 35 hedge funds’ portfolio at the end of the first quarter of 2013. LLY has seen a decrease in activity from the world’s largest hedge funds lately. There were 36 hedge funds in our database with LLY positions at the end of the previous quarter.

In the financial world, there are dozens of methods investors can use to track their holdings. A pair of the most useful are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the best money managers can beat the S&P 500 by a superb margin (see just how much).

Just as integral, bullish insider trading activity is a second way to parse down the financial markets. Just as you’d expect, there are a number of stimuli for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of academic studies have demonstrated the useful potential of this method if investors know where to look (learn more here).

With these “truths” under our belt, we’re going to take a gander at the key action regarding Eli Lilly & Co. (NYSE:LLY).

Hedge fund activity in Eli Lilly & Co. (NYSE:LLY)

At Q1’s end, a total of 35 of the hedge funds we track held long positions in this stock, a change of -3% from one quarter earlier. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings significantly.

When looking at the hedgies we track, Jim Simons’s Renaissance Technologies had the largest position in Eli Lilly & Co. (NYSE:LLY), worth close to $599.5 million, comprising 1.5% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which held a $204.8 million position; 1.6% of its 13F portfolio is allocated to the stock. Remaining hedge funds that are bullish include Cliff Asness’s AQR Capital Management, Stanley Druckenmiller’s Duquesne Capital and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.

Due to the fact that Eli Lilly & Co. (NYSE:LLY) has experienced falling interest from the smart money, it’s safe to say that there exists a select few money managers that elected to cut their positions entirely last quarter. At the top of the heap, Stephen DuBois’s Camber Capital Management dumped the largest investment of the “upper crust” of funds we key on, comprising about $49 million in call options. Stephen DuBois’s fund, Camber Capital Management, also dumped its call options., about $24.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.

Insider trading activity in Eli Lilly & Co. (NYSE:LLY)

Bullish insider trading is at its handiest when the company in question has experienced transactions within the past half-year. Over the latest half-year time period, Eli Lilly & Co. (NYSE:LLY) has seen zero unique insiders buying, and 7 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Eli Lilly & Co. (NYSE:LLY). These stocks are Merck & Co., Inc. (NYSE:MRK), GlaxoSmithKline plc (ADR) (NYSE:GSK), Bristol Myers Squibb Co. (NYSE:BMY), AstraZeneca plc (ADR) (NYSE:AZN), and AbbVie Inc (NYSE:ABBV). This group of stocks are in the drug manufacturers – major industry and their market caps match LLY’s market cap.