This Metric Says You Are Smart to Sell Nature’s Sunshine Prod. (NATR)

Is Nature’s Sunshine Prod. (NASDAQ:NATR) a cheap stock to buy now? The best stock pickers are becoming less hopeful. The number of bullish hedge fund positions shrunk by 2 lately.

To most investors, hedge funds are viewed as underperforming, outdated financial tools of years past. While there are more than 8000 funds with their doors open at present, we look at the crème de la crème of this group, close to 450 funds. Most estimates calculate that this group has its hands on the majority of the hedge fund industry’s total capital, and by keeping an eye on their top picks, we have figured out a number of investment strategies that have historically outperformed 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as key, positive insider trading sentiment is a second way to break down the stock market universe. Just as you’d expect, there are a variety of stimuli for a bullish insider to get rid of shares of his or her company, but just one, very clear reason why they would initiate a purchase. Many empirical studies have demonstrated the valuable potential of this method if shareholders know what to do (learn more here).

With all of this in mind, let’s take a peek at the recent action surrounding Nature’s Sunshine Prod. (NASDAQ:NATR).

How are hedge funds trading Nature’s Sunshine Prod. (NASDAQ:NATR)?

In preparation for this quarter, a total of 5 of the hedge funds we track were bullish in this stock, a change of -29% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly.

According to our comprehensive database, Prescott Group Capital Management, managed by Phil Frohlich, holds the biggest position in Nature’s Sunshine Prod. (NASDAQ:NATR). Prescott Group Capital Management has a $28.4 million position in the stock, comprising 6.4% of its 13F portfolio. Sitting at the No. 2 spot is Wynnefield Capital, managed by Nelson Obus, which held a $22.8 million position; the fund has 7.8% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Judging by the fact that Nature’s Sunshine Prod. (NASDAQ:NATR) has experienced falling interest from the smart money, logic holds that there exists a select few hedge funds that decided to sell off their entire stakes heading into Q2. Interestingly, Joel Greenblatt’s Gotham Asset Management dumped the biggest position of the 450+ funds we watch, comprising close to $0.6 million in stock.. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s fund, GRT Capital Partners, also cut its stock, about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q2.

How are insiders trading Nature’s Sunshine Prod. (NASDAQ:NATR)?

Insider purchases made by high-level executives is most useful when the company in focus has seen transactions within the past six months. Over the latest 180-day time frame, Nature’s Sunshine Prod. (NASDAQ:NATR) has experienced 1 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the returns exhibited by the aforementioned research, everyday investors must always monitor hedge fund and insider trading sentiment, and Nature’s Sunshine Prod. (NASDAQ:NATR) is an important part of this process.

Click here to learn why you should track hedge funds