Trius Therapeutics, Inc. (TSRX): Are Hedge Funds Right About This Stock?

Trius Therapeutics, Inc. (NASDAQ:TSRX) was in 8 hedge funds’ portfolio at the end of December. TSRX has experienced a decrease in enthusiasm from smart money recently. There were 11 hedge funds in our database with TSRX positions at the end of the previous quarter.

If you’d ask most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are greater than 8000 funds trading at the moment, we choose to focus on the upper echelon of this group, around 450 funds. It is estimated that this group oversees the majority of the hedge fund industry’s total capital, and by keeping an eye on their best picks, we have unearthed a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 24 percentage points in 7 months (see the details here).

Equally as key, optimistic insider trading activity is another way to break down the investments you’re interested in. There are many stimuli for a corporate insider to drop shares of his or her company, but only one, very obvious reason why they would buy. Various empirical studies have demonstrated the impressive potential of this strategy if shareholders understand where to look (learn more here).

With these “truths” under our belt, let’s take a glance at the recent action regarding Trius Therapeutics, Inc. (NASDAQ:TSRX).

What does the smart money think about Trius Therapeutics, Inc. (NASDAQ:TSRX)?

At the end of the fourth quarter, a total of 8 of the hedge funds we track held long positions in this stock, a change of -27% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially.

Of the funds we track, Broadfin Capital, managed by Kevin Kotler, holds the largest position in Trius Therapeutics, Inc. (NASDAQ:TSRX). Broadfin Capital has a $5.8 million position in the stock, comprising 1.4% of its 13F portfolio. The second largest stake is held by Jean-Marie Eveillard of First Eagle Investment Management, with a $5.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that are bullish include Gregory Fraser, Rudolph Kluiber, and Timothy Kroch’s GRT Capital Partners, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Israel Englander’s Millennium Management.

Since Trius Therapeutics, Inc. (NASDAQ:TSRX) has faced bearish sentiment from the smart money, it’s safe to say that there exists a select few money managers who sold off their entire stakes heading into 2013. At the top of the heap, JΘr⌠me Pfund and Michael Sj÷str÷m’s Sectoral Asset Management dumped the biggest investment of all the hedgies we monitor, worth close to $5.9 million in stock.. Richard Schimel’s fund, Diamondback Capital, also said goodbye to its stock, about $1.2 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds heading into 2013.

Insider trading activity in Trius Therapeutics, Inc. (NASDAQ:TSRX)

Bullish insider trading is best served when the company in question has seen transactions within the past half-year. Over the last six-month time frame, Trius Therapeutics, Inc. (NASDAQ:TSRX) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Trius Therapeutics, Inc. (NASDAQ:TSRX). These stocks are NeoGenomics, Inc. (NASDAQ:NEO), TearLab Corporation (NASDAQ:TEAR), China Cord Blood Corp (NYSE:CO), Nordion Inc (USA) (NYSE:NDZ), and Novadaq Technologies Inc. (NASDAQ:NVDQ). This group of stocks are in the medical laboratories & research industry and their market caps are similar to TSRX’s market cap.

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With the results demonstrated by our strategies, retail investors must always keep an eye on hedge fund and insider trading activity, and Trius Therapeutics, Inc. (NASDAQ:TSRX) applies perfectly to this mantra.

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