Taro Pharmaceutical Industries Ltd. (TARO): Insiders Aren’t Crazy About It

Taro Pharmaceutical Industries Ltd. (NYSE:TARO) was in 8 hedge funds’ portfolio at the end of March. TARO investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 4 hedge funds in our database with TARO positions at the end of the previous quarter.

To most investors, hedge funds are perceived as worthless, outdated financial vehicles of the past. While there are over 8000 funds with their doors open at present, we at Insider Monkey choose to focus on the leaders of this club, around 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total asset base, and by watching their highest performing stock picks, we have uncovered a few investment strategies that have historically outstripped 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 beaten 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 activity is another way to parse down the investments you’re interested in. There are a number of stimuli for a bullish insider to cut shares of his or her company, but only one, very clear reason why they would buy. Various empirical studies have demonstrated the impressive potential of this tactic if shareholders know what to do (learn more here).

Consequently, let’s take a glance at the latest action encompassing Taro Pharmaceutical Industries Ltd. (NYSE:TARO).

How have hedgies been trading Taro Pharmaceutical Industries Ltd. (NYSE:TARO)?

Heading into Q2, a total of 8 of the hedge funds we track were bullish in this stock, a change of 100% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly.

When looking at the hedgies we track, Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, holds the largest position in Taro Pharmaceutical Industries Ltd. (NYSE:TARO). Blue Mountain Capital has a $38.2 million position in the stock, comprising 2.3% of its 13F portfolio. Sitting at the No. 2 spot is Greywolf Capital Management, managed by Jonathan Savitz, which held a $22.9 million position; 10.6% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include Quincy Lee’s Ancient Art (Teton Capital), Jim Simons’s Renaissance Technologies and D. E. Shaw’s D E Shaw.

As aggregate interest increased, key hedge funds have jumped into Taro Pharmaceutical Industries Ltd. (NYSE:TARO) headfirst. D E Shaw, managed by D. E. Shaw, initiated the biggest position in Taro Pharmaceutical Industries Ltd. (NYSE:TARO). D E Shaw had 2.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.6 million investment in the stock during the quarter. The other funds with brand new TARO positions are Paul Reeder and Edward Shapiro’s PAR Capital Management and Paul Touradji’s TOURADJI CAPITAL MANAGEMENT, LP.

How have insiders been trading Taro Pharmaceutical Industries Ltd. (NYSE:TARO)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company we’re looking at has experienced transactions within the past 180 days. Over the latest six-month time period, Taro Pharmaceutical Industries Ltd. (NYSE:TARO) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Taro Pharmaceutical Industries Ltd. (NYSE:TARO). These stocks are The Medicines Company (NASDAQ:MDCO), Endo Health Solutions Inc (NASDAQ:ENDP), Warner Chilcott Plc (NASDAQ:WCRX), United Therapeutics Corporation (NASDAQ:UTHR), and Cubist Pharmaceuticals Inc (NASDAQ:CBST). This group of stocks belong to the drug manufacturers – other industry and their market caps are similar to TARO’s market cap.

With the results demonstrated by the aforementioned time-tested strategies, retail investors must always monitor hedge fund and insider trading activity, and Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is an important part of this process.

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