Perrigo Company (PRGO): Hedge Funds Are Bearish and Insiders Are Undecided, What Should You Do?

Should Perrigo Company (NYSE:PRGO) investors track the following data?


In the eyes of many traders, hedge funds are perceived as useless, outdated financial vehicles of a period lost to current times. Although there are over 8,000 hedge funds in operation in present day, Insider Monkey aim at the masters of this club, around 525 funds. It is widely held that this group oversees most of all hedge funds' total assets, and by watching their highest performing equity investments, we've formulated a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year 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 trumped the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).


Just as crucial, positive insider trading activity is another way to look at the marketplace. Just as you'd expect, there are lots of incentives for a bullish insider to cut shares of his or her company, but just one, very clear reason why they would initiate a purchase. Many empirical studies have demonstrated the market-beating potential of this tactic if you understand where to look (learn more here).


Now that that's out of the way, we're going to analyze the latest info surrounding Perrigo Company (NYSE:PRGO).


Perrigo Company (NYSE:PRGO)

How are hedge funds trading Perrigo Company (NYSE:PRGO)?


In preparation for the third quarter, a total of 16 of the hedge funds we track were bullish in this stock, a change of -33% from the previous quarter. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully.


According to our 13F database, Jacob Gottlieb's Visium Asset Management had the most valuable position in Perrigo Company (NYSE:PRGO), worth close to $140.4 million, accounting for 3.3% of its total 13F portfolio. Sitting at the No. 2 spot is Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, which held a $71.8 million position; 2.1% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Ken Fisher's Fisher Asset Management, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management.


Since Perrigo Company (NYSE:PRGO) has experienced declining interest from the smart money's best and brightest, it's easy to see that there was a specific group of fund managers that elected to cut their entire stakes heading into Q2. At the top of the heap, Arthur B Cohen and Joseph Healey's Healthcor Management LP dropped the largest position of all the hedgies we track, totaling about $38.6 million in stock. Joe DiMenna's fund, ZWEIG DIMENNA PARTNERS, also said goodbye to its stock, about $24.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds heading into Q2.

How are insiders trading Perrigo Company (NYSE:PRGO)?


Legal insider trading, particularly when it's bullish, is best served when the company in question has seen transactions within the past half-year. Over the last half-year time frame, Perrigo Company (NYSE:PRGO) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).


We'll also review the relationship between both of these indicators in other stocks similar to Perrigo Company (NYSE:PRGO). These stocks are Lifevantage Corporation (NASDAQ:LFVN), USANA Health Sciences, Inc. (NYSE:USNA), Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL), Prestige Brands Holdings, Inc. (NYSE:PBH), and Herbalife Ltd. (NYSE:HLF). This group of stocks are the members of the drug related products industry and their market caps are similar to PRGO's market cap.

Company Name
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling

Lifevantage Corporation (NASDAQ:LFVN)
0
0

USANA Health Sciences, Inc. (NYSE:USNA)
13
0
0

Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL)
27
0
0

Prestige Brands Holdings, Inc. (NYSE:PBH)
23
0
0

Herbalife Ltd. (NYSE:HLF)
37
0
0

Using the returns explained by the previously mentioned strategies, average investors should always watch hedge fund and insider trading activity, and Perrigo Company (NYSE:PRGO) applies perfectly to this mantra.


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