This Metric Says You Are Smart to Sell Bristol Myers Squibb Co. (BMY)

Bristol Myers Squibb Co. (NYSE:BMY) was in 33 hedge funds’ portfolio at the end of the first quarter of 2013. BMY has experienced a decrease in support from the world’s most elite money managers recently. There were 38 hedge funds in our database with BMY positions at the end of the previous quarter.

In the financial world, there are dozens of metrics shareholders can use to track stocks. A duo of the most underrated 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 money managers can outclass the S&P 500 by a very impressive amount (see just how much).

Just as integral, bullish insider trading sentiment is a second way to break down the marketplace. Just as you’d expect, there are a number of motivations for a bullish insider to downsize shares of his or her company, but only one, very simple reason why they would buy. Plenty of academic studies have demonstrated the market-beating potential of this tactic if “monkeys” know what to do (learn more here).

Now, let’s take a look at the recent action regarding Bristol Myers Squibb Co. (NYSE:BMY).

How are hedge funds trading Bristol Myers Squibb Co. (NYSE:BMY)?

Heading into Q2, a total of 33 of the hedge funds we track held long positions in this stock, a change of -13% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially.

According to our comprehensive database, Renaissance Technologies, managed by Jim Simons, holds the largest position in Bristol Myers Squibb Co. (NYSE:BMY). Renaissance Technologies has a $581.4 million position in the stock, comprising 1.4% of its 13F portfolio. On Renaissance Technologies’s heels is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $227.2 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include Samuel Isaly’s OrbiMed Advisors, Ken Griffin’s Citadel Investment Group and Mario Gabelli’s GAMCO Investors.

Seeing as Bristol Myers Squibb Co. (NYSE:BMY) has witnessed bearish sentiment from the smart money, logic holds that there is a sect of hedgies who sold off their entire stakes in Q1. Interestingly, James E. Flynn’s Deerfield Management dumped the biggest position of the “upper crust” of funds we track, comprising close to $8.1 million in call options, and Mark Kingdon of Kingdon Capital was right behind this move, as the fund dropped about $8.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 5 funds in Q1.

What have insiders been doing with Bristol Myers Squibb Co. (NYSE:BMY)?

Insider buying is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the last half-year time frame, Bristol Myers Squibb Co. (NYSE:BMY) has seen zero unique insiders purchasing, and 13 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Bristol Myers Squibb Co. (NYSE:BMY). These stocks are Merck & Co., Inc. (NYSE:MRK), GlaxoSmithKline plc (ADR) (NYSE:GSK), AstraZeneca plc (ADR) (NYSE:AZN), Eli Lilly & Co. (NYSE:LLY), and AbbVie Inc (NYSE:ABBV). This group of stocks are in the drug manufacturers – major industry and their market caps are similar to BMY’s market cap.

With the returns shown by our studies, retail investors should always monitor hedge fund and insider trading activity, and Bristol Myers Squibb Co. (NYSE:BMY) is an important part of this process.

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