Sagent Pharmaceuticals Inc (SGNT): Hedge Funds and Insiders Are Bearish, What Should You Do?

Sagent Pharmaceuticals Inc (NASDAQ:SGNT) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently.

If you’d ask most investors, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are over 8000 funds in operation at the moment, we at Insider Monkey choose to focus on the elite of this group, about 450 funds. It is estimated that this group controls the majority of the smart money’s total capital, and by tracking their best investments, we have uncovered a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as key, optimistic insider trading activity is another way to break down the investments you’re interested in. There are plenty of reasons for an insider to get rid of shares of his or her company, but just one, very obvious reason why they would buy. Several academic studies have demonstrated the impressive potential of this method if piggybackers understand what to do (learn more here).

Now, let’s take a peek at the key action regarding Sagent Pharmaceuticals Inc (NASDAQ:SGNT).

How are hedge funds trading Sagent Pharmaceuticals Inc (NASDAQ:SGNT)?

At the end of the first quarter, a total of 10 of the hedge funds we track were long in this stock, a change of -17% from the previous quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings meaningfully.

Of the funds we track, Deerfield Management, managed by James E. Flynn, holds the biggest position in Sagent Pharmaceuticals Inc (NASDAQ:SGNT). Deerfield Management has a $37.4 million position in the stock, comprising 2.2% of its 13F portfolio. The second largest stake is held by Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, which held a $11.4 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include Jacob Gottlieb’s Visium Asset Management, Dmitry Balyasny’s Balyasny Asset Management and Mark Kingdon’s Kingdon Capital.

Because Sagent Pharmaceuticals Inc (NASDAQ:SGNT) has witnessed declining sentiment from the smart money, it’s easy to see that there were a few money managers that slashed their full holdings last quarter. Interestingly, Stephen DuBois’s Camber Capital Management cut the biggest investment of the “upper crust” of funds we monitor, worth about $3.7 million in stock., and Phill Gross and Robert Atchinson of Adage Capital Management was right behind this move, as the fund dropped about $1.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.

Insider trading activity in Sagent Pharmaceuticals Inc (NASDAQ:SGNT)

Insider buying is best served when the company in focus has experienced transactions within the past 180 days. Over the latest half-year time period, Sagent Pharmaceuticals Inc (NASDAQ:SGNT) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Sagent Pharmaceuticals Inc (NASDAQ:SGNT). These stocks are Akorn, Inc. (NASDAQ:AKRX), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Avanir Pharmaceuticals, Inc. (NASDAQ:AVNR), Hi-Tech Pharmacal Co. (NASDAQ:HITK), and Ligand Pharmaceuticals Inc. (NASDAQ:LGND). This group of stocks belong to the drugs – generic industry and their market caps are closest to SGNT’s market cap.

With the returns shown by our research, retail investors should always pay attention to hedge fund and insider trading sentiment, and Sagent Pharmaceuticals Inc (NASDAQ:SGNT) shareholders fit into this picture quite nicely.

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