Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Alexco Resource Corp. (NYSE:AXU).
Is Alexco Resource Corp. (NYSE:AXU) a cheap investment now? Investors who are in the know are reducing their bets on the stock. The number of long hedge fund positions were cut by 2 in recent months. Our calculations also showed that AXU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AXU was in 3 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with AXU holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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.
Jim Simons of Renaissance Technologies
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. Keeping this in mind let’s take a glance at the latest hedge fund action regarding Alexco Resource Corp. (NYSE:AXU).
Hedge fund activity in Alexco Resource Corp. (NYSE:AXU)
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from the second quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in AXU a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Alexco Resource Corp. (NYSE:AXU), with a stake worth $1.7 million reported as of the end of September. Trailing Renaissance Technologies was Sprott Asset Management, which amassed a stake valued at $1.3 million. Citadel Investment Group was 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 Sprott Asset Management allocated the biggest weight to Alexco Resource Corp. (NYSE:AXU), around 0.33% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0014 percent of its 13F equity portfolio to AXU.
Due to the fact that Alexco Resource Corp. (NYSE:AXU) has witnessed declining sentiment from the smart money, logic holds that there is a sect of money managers who sold off their entire stakes by the end of the third quarter. Intriguingly, Jonathan Barrett and Paul Segal’s Luminus Management cut the largest investment of the 750 funds monitored by Insider Monkey, totaling close to $1 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund cut about $0.3 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Alexco Resource Corp. (NYSE:AXU). These stocks are Bicycle Therapeutics plc (NASDAQ:BCYC), KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), Inovio Pharmaceuticals Inc (NYSE:INO), and Chemung Financial Corp. (NASDAQ:CHMG). This group of stocks’ market caps are closest to AXU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCYC | 6 | 34158 | -1 |
| KLXE | 13 | 20213 | 5 |
| INO | 3 | 775 | -2 |
| CHMG | 3 | 10137 | -1 |
| Average | 6.25 | 16321 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $3 million in AXU’s case. KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) is the most popular stock in this table. On the other hand Inovio Pharmaceuticals Inc (NYSE:INO) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Alexco Resource Corp. (NYSE:AXU) is even less popular than INO. Hedge funds dodged a bullet by taking a bearish stance towards AXU. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AXU wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AXU investors were disappointed as the stock returned 1.7% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.