Is EnteroMedics Inc (NASDAQ:ETRM) ready to rally soon? Prominent investors are taking a bullish view. The number of long hedge fund positions increased by 1 lately.
To most investors, hedge funds are viewed as slow, old financial vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, we at Insider Monkey hone in on the moguls of this club, close to 450 funds. Most estimates calculate that this group oversees the lion’s share of all hedge funds’ total asset base, and by tracking their best investments, we have deciphered a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually 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 topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Just as key, positive insider trading activity is another way to break down the marketplace. There are many stimuli for an insider to downsize shares of his or her company, but only one, very clear reason why they would buy. Plenty of academic studies have demonstrated the impressive potential of this method if piggybackers know what to do (learn more here).
Keeping this in mind, it’s important to take a look at the key action surrounding EnteroMedics Inc (NASDAQ:ETRM).
How have hedgies been trading EnteroMedics Inc (NASDAQ:ETRM)?
In preparation for this quarter, a total of 7 of the hedge funds we track were bullish in this stock, a change of 17% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes substantially.
When looking at the hedgies we track, Philip Hempleman’s Ardsley Partners had the biggest position in EnteroMedics Inc (NASDAQ:ETRM), worth close to $3 million, comprising 0.4% of its total 13F portfolio. On Ardsley Partners’s heels is Andy Redleaf of Whitebox Advisors, with a $1.3 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedgies with similar optimism include Thomas Bailard’s Bailard Inc, Phil Frohlich’s Prescott Group Capital Management and Jim Simons’s Renaissance Technologies.
As industrywide interest jumped, specific money managers have been driving this bullishness. Prescott Group Capital Management, managed by Phil Frohlich, initiated the most outsized position in EnteroMedics Inc (NASDAQ:ETRM). Prescott Group Capital Management had 0.4 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new ETRM position is Nathan Fischel’s DAFNA Capital Management.
Insider trading activity in EnteroMedics Inc (NASDAQ:ETRM)
Insider buying is most useful when the company in focus has experienced transactions within the past 180 days. Over the latest half-year time period, EnteroMedics Inc (NASDAQ:ETRM) has experienced 2 unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to EnteroMedics Inc (NASDAQ:ETRM). These stocks are Digirad Corporation (NASDAQ:DRAD), Vision-Sciences, Inc. (NASDAQ:VSCI), Theragenics Corporation (NYSE:TGX), Span-America Medical Systems, Inc. (NASDAQ:SPAN), and Uroplasty, Inc. (NASDAQ:UPI). This group of stocks belong to the medical appliances & equipment industry and their market caps match ETRM’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Digirad Corporation (NASDAQ:DRAD) | 2 | 2 | 0 |
| Vision-Sciences, Inc. (NASDAQ:VSCI) | 3 | 1 | 0 |
| Theragenics Corporation (NYSE:TGX) | 6 | 0 | 0 |
| Span-America Medical Systems, Inc. (NASDAQ:SPAN) | 1 | 0 | 2 |
| Uroplasty, Inc. (NASDAQ:UPI) | 6 | 0 | 0 |
With the results demonstrated by Insider Monkey’s research, everyday investors should always pay attention to hedge fund and insider trading sentiment, and EnteroMedics Inc (NASDAQ:ETRM) is no exception.
