Is Cyberonics, Inc. (NASDAQ:CYBX) a buy here? Money managers are reducing their bets on the stock. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience
According to most stock holders, hedge funds are assumed to be slow, old investment tools of yesteryear. While there are more than 8000 funds with their doors open today, we at Insider Monkey look at the upper echelon of this group, around 450 funds. It is estimated that this group oversees the majority of the hedge fund industry’s total asset base, and by watching their top picks, we have unsheathed a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outpaced 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 trumped the S&P 500 index by 25 percentage points in 6.5 month (see the details here).
Equally as integral, optimistic insider trading sentiment is another way to parse down the marketplace. Obviously, there are many stimuli for a bullish insider to get rid of shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the market-beating potential of this strategy if “monkeys” know where to look (learn more here).
With these “truths” under our belt, let’s take a look at the key action surrounding Cyberonics, Inc. (NASDAQ:CYBX).
What have hedge funds been doing with Cyberonics, Inc. (NASDAQ:CYBX)?
In preparation for this year, a total of 18 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially.
According to our comprehensive database, William Leland Edwards’s Palo Alto Investors had the most valuable position in Cyberonics, Inc. (NASDAQ:CYBX), worth close to $102 million, comprising 12% of its total 13F portfolio. On Palo Alto Investors’s heels is Jim Simons of Renaissance Technologies, with a $97 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include Donald Chiboucis’s Columbus Circle Investors, Drew Cupps’s Cupps Capital Management and Xerion.
Seeing as Cyberonics, Inc. (NASDAQ:CYBX) has experienced declining sentiment from the smart money, it’s easy to see that there was a specific group of hedgies who sold off their full holdings at the end of the year. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the largest investment of all the hedgies we watch, comprising an estimated $3 million in stock., and Andy Redleaf of Whitebox Advisors was right behind this move, as the fund sold off about $1 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
How have insiders been trading Cyberonics, Inc. (NASDAQ:CYBX)?
Bullish insider trading is particularly usable when the primary stock in question has seen transactions within the past half-year. Over the latest half-year time frame, Cyberonics, Inc. (NASDAQ:CYBX) has experienced 7 unique insiders purchasing, and 14 insider sales (see the details of insider trades here).
With the results demonstrated by our strategies, retail investors must always watch hedge fund and insider trading sentiment, and Cyberonics, Inc. (NASDAQ:CYBX) applies perfectly to this mantra.
Click here to learn more about Insider Monkey’s Hedge Fund Newsletter
Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.
