Hedge Funds Are Crazy About Dyax Corp. (DYAX)

Dyax Corp. (NASDAQ:DYAX) has seen an increase in support from the world’s most elite money managers in recent months.

In the eyes of most traders, hedge funds are assumed to be worthless, old financial tools of yesteryear. While there are more than 8000 funds trading at the moment, we at Insider Monkey hone in on the masters of this group, close to 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total asset base, and by monitoring their best investments, we have unearthed a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as important, optimistic insider trading sentiment is a second way to parse down the financial markets. As the old adage goes: there are a variety of stimuli for an executive to get rid of shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the market-beating potential of this strategy if “monkeys” understand what to do (learn more here).

With all of this in mind, we’re going to take a gander at the recent action encompassing Dyax Corp. (NASDAQ:DYAX).

What have hedge funds been doing with Dyax Corp. (NASDAQ:DYAX)?

Heading into Q2, a total of 13 of the hedge funds we track were bullish in this stock, a change of 18% from the first quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully.

When looking at the hedgies we track, RA Capital Management, managed by Peter Kolchinsky, holds the most valuable position in Dyax Corp. (NASDAQ:DYAX). RA Capital Management has a $37.2 million position in the stock, comprising 8% of its 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $8.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers with similar optimism include SAC Subsidiary’s Sigma Capital Management, Joseph Edelman’s Perceptive Advisors and Nathan Fischel’s DAFNA Capital Management.

As industrywide interest jumped, some big names were leading the bulls’ herd. Bailard Inc, managed by Thomas Bailard, established the most valuable position in Dyax Corp. (NASDAQ:DYAX). Bailard Inc had 0.7 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $0.6 million investment in the stock during the quarter. The only other fund with a brand new DYAX position is Steven Cohen’s SAC Capital Advisors.

How have insiders been trading Dyax Corp. (NASDAQ:DYAX)?

Insider trading activity, especially when it’s bullish, is at its handiest when the primary stock in question has seen transactions within the past six months. Over the last six-month time frame, Dyax Corp. (NASDAQ:DYAX) has experienced 1 unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Dyax Corp. (NASDAQ:DYAX). These stocks are Cambrex Corporation (NYSE:CBM), Sequenom, Inc. (NASDAQ:SQNM), Idenix Pharmaceuticals Inc (NASDAQ:IDIX), Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), and QLT Inc. (USA) (NASDAQ:QLTI). This group of stocks are the members of the biotechnology industry and their market caps are similar to DYAX’s market cap.

With the results shown by our studies, retail investors must always monitor hedge fund and insider trading sentiment, and Dyax Corp. (NASDAQ:DYAX) applies perfectly to this mantra.

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