Should You Avoid Merrimack Pharmaceuticals Inc (MACK)?

Merrimack Pharmaceuticals Inc (NASDAQ:MACK) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately.

To the average investor, there are a multitude of gauges investors can use to monitor their holdings. Some of the most under-the-radar are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the best money managers can outpace the S&P 500 by a superb amount (see just how much).

Just as key, bullish insider trading sentiment is a second way to break down the world of equities. Obviously, there are a variety of stimuli for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Several academic studies have demonstrated the useful potential of this method if investors know where to look (learn more here).

Consequently, let’s take a peek at the recent action regarding Merrimack Pharmaceuticals Inc (NASDAQ:MACK).

How are hedge funds trading Merrimack Pharmaceuticals Inc (NASDAQ:MACK)?

At year’s end, a total of 7 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably.

Of the funds we track, TPG-AXON Management LP, managed by Dinakar Singh, holds the most valuable position in Merrimack Pharmaceuticals Inc (NASDAQ:MACK). TPG-AXON Management LP has a $20.1 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Thomas Steyer of Farallon Capital, with a $6.5 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedgies that are bullish include Alec Litowitz and Ross Laser’s Magnetar Capital, Israel Englander’s Millennium Management and Anand Parekh’s Alyeska Investment Group.

Judging by the fact that Merrimack Pharmaceuticals Inc (NASDAQ:MACK) has experienced a declination in interest from hedge fund managers, logic holds that there was a specific group of funds that decided to sell off their positions entirely heading into 2013. At the top of the heap, Steven Cohen’s SAC Capital Advisors sold off the biggest position of the “upper crust” of funds we watch, comprising about $8.1 million in stock., and Richard Driehaus of Driehaus Capital was right behind this move, as the fund dumped about $3.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading Merrimack Pharmaceuticals Inc (NASDAQ:MACK)?

Insider buying is at its handiest when the company we’re looking at has seen transactions within the past 180 days. Over the latest 180-day time period, Merrimack Pharmaceuticals Inc (NASDAQ:MACK) has experienced 3 unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Merrimack Pharmaceuticals Inc (NASDAQ:MACK). These stocks are EXACT Sciences Corporation (NASDAQ:EXAS), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Optimer Pharmaceuticals, Inc. (NASDAQ:OPTR), Array Biopharma Inc (NASDAQ:ARRY), and Cadence Pharmaceuticals, Inc. (NASDAQ:CADX). This group of stocks belong to the biotechnology industry and their market caps are similar to MACK’s market cap.

With the returns exhibited by the aforementioned strategies, everyday investors should always watch hedge fund and insider trading sentiment, and Merrimack Pharmaceuticals Inc (NASDAQ:MACK) shareholders fit into this picture quite nicely.

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