Should You Buy Obagi Medical Products, Inc. (OMPI)?

Obagi Medical Products, Inc. (NASDAQ:OMPI) investors should pay attention to an increase in support from the world’s most elite money managers of late.

According to most traders, hedge funds are perceived as underperforming, outdated financial tools of years past. While there are over 8000 funds in operation today, we at Insider Monkey look at the leaders of this group, about 450 funds. Most estimates calculate that this group oversees the majority of all hedge funds’ total asset base, and by monitoring their highest performing equity investments, we have unsheathed a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as integral, positive insider trading activity is another way to break down the stock market universe. As the old adage goes: there are lots of incentives for a corporate insider to sell shares of his or her company, but only one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the impressive potential of this method if shareholders understand what to do (learn more here).

Keeping this in mind, we’re going to take a look at the latest action encompassing Obagi Medical Products, Inc. (NASDAQ:OMPI).

What does the smart money think about Obagi Medical Products, Inc. (NASDAQ:OMPI)?

In preparation for this quarter, a total of 16 of the hedge funds we track held long positions in this stock, a change of 129% from the first quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably.

According to our comprehensive database, Mario Gabelli’s GAMCO Investors had the most valuable position in Obagi Medical Products, Inc. (NASDAQ:OMPI), worth close to $11.6 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Alpine Associates, managed by Robert Emil Zoellner, which held a $8.8 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining hedgies that are bullish include Clint Carlson’s Carlson Capital, Jim Simons’s Renaissance Technologies and Jean-Marie Eveillard’s First Eagle Investment Management.

As one would reasonably expect, some big names were breaking ground themselves. GAMCO Investors, managed by Mario Gabelli, initiated the biggest position in Obagi Medical Products, Inc. (NASDAQ:OMPI). GAMCO Investors had 11.6 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also made a $8.8 million investment in the stock during the quarter. The other funds with brand new OMPI positions are Clint Carlson’s Carlson Capital, Jean-Marie Eveillard’s First Eagle Investment Management, and Nancy Havens-Hasty’s Havens Advisors.

Insider trading activity in Obagi Medical Products, Inc. (NASDAQ:OMPI)

Bullish insider trading is most useful when the company in question has seen transactions within the past 180 days. Over the last six-month time period, Obagi Medical Products, Inc. (NASDAQ:OMPI) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Obagi Medical Products, Inc. (NASDAQ:OMPI). These stocks are Novavax, Inc. (NASDAQ:NVAX), XenoPort, Inc. (NASDAQ:XNPT), 3SBio Inc. (ADR) (NASDAQ:SSRX), Osiris Therapeutics, Inc. (NASDAQ:OSIR), and Vical Incorporated (NASDAQ:VICL). All of these stocks are in the biotechnology industry and their market caps match OMPI’s market cap.