Should You Buy XOMA Corp (XOMA)?

XOMA Corp (NASDAQ:XOMA) investors should be aware of an increase in hedge fund interest recently.

In the eyes of most stock holders, hedge funds are seen as unimportant, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation at the moment, we look at 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 capital, and by watching their highest performing equity investments, we have unsheathed a few investment strategies that have historically beaten the market. 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 began to 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 (check out a sample of our picks).

Equally as integral, positive insider trading sentiment is another way to parse down the financial markets. Obviously, there are many incentives for a corporate insider to downsize shares of his or her company, but only one, very obvious reason why they would buy. Several academic studies have demonstrated the valuable potential of this tactic if you know what to do (learn more here).

With all of this in mind, it’s important to take a gander at the latest action encompassing XOMA Corp (NASDAQ:XOMA).

How are hedge funds trading XOMA Corp (NASDAQ:XOMA)?

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 43% from the previous quarter.

As aggregate interest increased, key money managers have jumped into XOMA Corp (NASDAQ:XOMA) headfirst. Palo Alto Investors, managed by William Leland Edwards, assembled the largest position in XOMA Corp (NASDAQ:XOMA). Palo Alto Investors had 0.6 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group and Ken Griffin’s Citadel Investment Group.

How are insiders trading XOMA Corp (NASDAQ:XOMA)?

Bullish insider trading is most useful when the company in question has experienced transactions within the past half-year. Over the latest six-month time period, XOMA Corp (NASDAQ:XOMA) has seen zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to XOMA Corp (NASDAQ:XOMA). These stocks are NewLink Genetics Corp (NASDAQ:NLNK), Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX), Repros Therapeutics Inc (NASDAQ:RPRX), Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS), and Cerus Corporation (NASDAQ:CERS). All of these stocks are in the biotechnology industry and their market caps resemble XOMA’s market cap.

With the results shown by the aforementioned research, everyday investors should always watch hedge fund and insider trading sentiment, and XOMA Corp (NASDAQ:XOMA) applies perfectly to this mantra.

Click here to learn why you should track hedge funds