Is AXT Inc (NASDAQ:AXTI) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is AXT Inc (NASDAQ:AXTI) going to take off soon? Money managers are buying. The number of long hedge fund bets increased by 1 recently. Our calculations also showed that AXTI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AXTI was in 8 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with AXTI positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s check out the fresh hedge fund action regarding AXT Inc (NASDAQ:AXTI).
What have hedge funds been doing with AXT Inc (NASDAQ:AXTI)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the second quarter of 2019. By comparison, 9 hedge funds held shares or bullish call options in AXTI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in AXT Inc (NASDAQ:AXTI), which was worth $8.7 million at the end of the third quarter. On the second spot was Ancora Advisors which amassed $0.9 million worth of shares. Renaissance Technologies, Marshall Wace, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to AXT Inc (NASDAQ:AXTI), around 0.08% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to AXTI.
As one would reasonably expect, specific money managers have been driving this bullishness. Marshall Wace, managed by Paul Marshall and Ian Wace, established the biggest position in AXT Inc (NASDAQ:AXTI). Marshall Wace had $0.6 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $0.5 million position during the quarter.
Let’s check out hedge fund activity in other stocks similar to AXT Inc (NASDAQ:AXTI). These stocks are Five Prime Therapeutics Inc (NASDAQ:FPRX), Greenlane Holdings, Inc. (NASDAQ:GNLN), Adamas Pharmaceuticals Inc (NASDAQ:ADMS), and Union Bankshares, Inc. (NASDAQ:UNB). This group of stocks’ market caps are similar to AXTI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FPRX | 18 | 41842 | -2 |
| GNLN | 6 | 9719 | 0 |
| ADMS | 10 | 8048 | 1 |
| UNB | 1 | 663 | 0 |
| Average | 8.75 | 15068 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $12 million in AXTI’s case. Five Prime Therapeutics Inc (NASDAQ:FPRX) is the most popular stock in this table. On the other hand Union Bankshares, Inc. (NASDAQ:UNB) is the least popular one with only 1 bullish hedge fund positions. AXT Inc (NASDAQ:AXTI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AXTI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AXTI investors were disappointed as the stock returned -11.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
