Hedge Funds Are Buying AXT Inc (AXTI)

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze AXT Inc (NASDAQ:AXTI) .

AXT Inc (NASDAQ:AXTI) shareholders have witnessed an increase in hedge fund interest lately. There were 6 hedge funds in our database with AXTI holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Layne Christensen Company (NASDAQ:LAYN), Era Group Inc (NYSE:ERA), and Century Casinos, Inc. (NASDAQ:CNTY) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Dragon Images/Shutterstock.com

Now, let’s review the new action encompassing AXT Inc (NASDAQ:AXTI).

How are hedge funds trading AXT Inc (NASDAQ:AXTI)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a boost of 83% from the second quarter of 2016. On the other hand, there were a total of 3 hedge funds with a bullish position in AXTI at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ariel Investments, led by John W. Rogers, holds the number one position in AXT Inc (NASDAQ:AXTI). According to regulatory filings, the fund has a $10.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, one of the largest hedge funds in the world, with a $4.7 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions contain Chuck Royce’s Royce & Associates, Mark Coe’s Coe Capital Management and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As aggregate interest increased, some big names were leading the bulls’ herd. Algert Coldiron Investors, led by Peter Algert and Kevin Coldiron, initiated the biggest position in AXT Inc (NASDAQ:AXTI). According to its latest 13F filing, the fund had $0.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.2 million position during the quarter. The following funds were also among the new AXTI investors: Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners, Ken Griffin’s Citadel Investment Group, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AXT Inc (NASDAQ:AXTI) but similarly valued. We will take a look at Layne Christensen Company (NASDAQ:LAYN), Era Group Inc (NYSE:ERA), Century Casinos, Inc. (NASDAQ:CNTY), and Mediwound Ltd (NASDAQ:MDWD). This group of stocks’ market caps resemble AXTI’s market cap.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $20 million in AXTI’s case. Layne Christensen Company (NASDAQ:LAYN) is the most popular stock in this table. On the other hand Mediwound Ltd (NASDAQ:MDWD) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks AXT Inc (NASDAQ:AXTI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none.