Health Net, Inc. (HNT): Hedge Funds and Insiders Are Bearish, What Should You Do?

Is Health Net, Inc. (NYSE:HNT) a bargain? Prominent investors are getting less bullish. The number of bullish hedge fund bets were cut by 2 recently.

At the moment, there are a multitude of methods investors can use to analyze their holdings. A duo of the most innovative are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the broader indices by a superb amount (see just how much).

Just as key, optimistic insider trading sentiment is a second way to parse down the financial markets. There are many reasons for an insider to cut shares of his or her company, but only one, very clear reason why they would behave bullishly. Various academic studies have demonstrated the valuable potential of this strategy if “monkeys” know where to look (learn more here).

With these “truths” under our belt, we’re going to take a peek at the recent action encompassing Health Net, Inc. (NYSE:HNT).

What have hedge funds been doing with Health Net, Inc. (NYSE:HNT)?

Heading into Q2, a total of 20 of the hedge funds we track were bullish in this stock, a change of -9% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, David Cohen and Harold Levy’s Iridian Asset Management had the most valuable position in Health Net, Inc. (NYSE:HNT), worth close to $207.5 million, accounting for 3% of its total 13F portfolio. On Iridian Asset Management’s heels is First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, which held a $80.7 million position; 0.9% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Christopher Medlock James’s Partner Fund Management, Thomas Ellis and Todd Hammer’s North Run Capital and Steven Cohen’s SAC Capital Advisors.

Since Health Net, Inc. (NYSE:HNT) has witnessed a declination in interest from the smart money, it’s safe to say that there is a sect of hedge funds that slashed their full holdings heading into Q2. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest investment of the “upper crust” of funds we track, worth an estimated $68.5 million in stock. Daniel Arbess’s fund, Xerion, also sold off its call options., about $16 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q2.

What have insiders been doing with Health Net, Inc. (NYSE:HNT)?

Insider purchases made by high-level executives is at its handiest when the company in question has experienced transactions within the past 180 days. Over the latest half-year time period, Health Net, Inc. (NYSE:HNT) has seen zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Health Net, Inc. (NYSE:HNT). These stocks are Coventry Health Care, Inc. (NYSE:CVH), Magellan Health Services Inc (NASDAQ:MGLN), Molina Healthcare, Inc. (NYSE:MOH), WellCare Health Plans, Inc. (NYSE:WCG), and Centene Corp (NYSE:CNC). All of these stocks are in the health care plans industry and their market caps match HNT’s market cap.