This Metric Says You Are Smart to Buy Nuance Communications Inc. (NUAN)

Nuance Communications Inc. (NASDAQ:NUAN) was in 20 hedge funds’ portfolio at the end of the first quarter of 2013. NUAN has experienced an increase in support from the world’s most elite money managers in recent months. There were 19 hedge funds in our database with NUAN holdings at the end of the previous quarter.

In the 21st century investor’s toolkit, there are dozens of indicators investors can use to track the equity markets. A pair of the most innovative are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the elite investment managers can beat the market by a significant margin (see just how much).

Equally as key, bullish insider trading sentiment is a second way to parse down the financial markets. As the old adage goes: there are plenty of motivations for a corporate insider to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several academic studies have demonstrated the useful potential of this method if piggybackers understand where to look (learn more here).

Consequently, we’re going to take a glance at the latest action regarding Nuance Communications Inc. (NASDAQ:NUAN).

What does the smart money think about Nuance Communications Inc. (NASDAQ:NUAN)?

In preparation for this quarter, a total of 20 of the hedge funds we track were bullish in this stock, a change of 5% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably.

When looking at the hedgies we track, Icahn Capital LP, managed by Carl Icahn, holds the largest position in Nuance Communications Inc. (NASDAQ:NUAN). Icahn Capital LP has a $76.9 million position in the stock, comprising 0.5% of its 13F portfolio. On Icahn Capital LP’s heels is Crosslink Capital, managed by Seymour Sy Kaufman and Michael Stark, which held a $17.9 million position; 1.6% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include Wojciech Uzdelewicz’s Espalier Global Management, Steven Cohen’s SAC Capital Advisors and William Harnisch’s Peconic Partners LLC.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Icahn Capital LP, managed by Carl Icahn, created the most valuable position in Nuance Communications Inc. (NASDAQ:NUAN). Icahn Capital LP had 76.9 million invested in the company at the end of the quarter. Wojciech Uzdelewicz’s Espalier Global Management also initiated a $16.1 million position during the quarter. The following funds were also among the new NUAN investors: SAC Subsidiary’s CR Intrinsic Investors, Leighton Welch’s Welch Capital Partners, and Keith Meister’s Corvex Capital.

How have insiders been trading Nuance Communications Inc. (NASDAQ:NUAN)?

Bullish insider trading is particularly usable when the primary stock in question has experienced transactions within the past 180 days. Over the latest half-year time period, Nuance Communications Inc. (NASDAQ:NUAN) has seen zero unique insiders purchasing, and 8 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 Nuance Communications Inc. (NASDAQ:NUAN). These stocks are Msci Inc (NYSE:MSCI), Red Hat, Inc. (NYSE:RHT), SolarWinds Inc (NYSE:SWI), F5 Networks, Inc. (NASDAQ:FFIV), and BMC Software, Inc. (NASDAQ:BMC). All of these stocks are in the application software industry and their market caps are similar to NUAN’s market cap.

With the results shown by the aforementioned time-tested strategies, retail investors should always monitor hedge fund and insider trading activity, and Nuance Communications Inc. (NASDAQ:NUAN) shareholders fit into this picture quite nicely.

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