Hedge Funds Are Piling Into Praxis Precision Medicines, Inc. (PRAX)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article we look at what those investors think of Praxis Precision Medicines, Inc. (NASDAQ:PRAX).

Is Praxis Precision Medicines, Inc. (NASDAQ:PRAX) a buy here? Prominent investors were taking an optimistic view. The number of bullish hedge fund bets advanced by 7 lately. Praxis Precision Medicines, Inc. (NASDAQ:PRAX) was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PRAX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Mark Kingdon of Kingdon Capital

With all of this in mind we’re going to go over the recent hedge fund action encompassing Praxis Precision Medicines, Inc. (NASDAQ:PRAX).

Do Hedge Funds Think PRAX Is A Good Stock To Buy Now?

At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 58% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in PRAX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Praxis Precision Medicines, Inc. (NASDAQ:PRAX) was held by Citadel Investment Group, which reported holding $34 million worth of stock at the end of June. It was followed by Avoro Capital Advisors (venBio Select Advisor) with a $29.2 million position. Other investors bullish on the company included Cormorant Asset Management, 72 Investment Holdings, and Point72 Asset Management. In terms of the portfolio weights assigned to each position 72 Investment Holdings allocated the biggest weight to Praxis Precision Medicines, Inc. (NASDAQ:PRAX), around 28.49% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, setting aside 1 percent of its 13F equity portfolio to PRAX.

As one would reasonably expect, key hedge funds have jumped into Praxis Precision Medicines, Inc. (NASDAQ:PRAX) headfirst. Partner Fund Management, managed by Christopher James, created the largest position in Praxis Precision Medicines, Inc. (NASDAQ:PRAX). Partner Fund Management had $8.3 million invested in the company at the end of the quarter. Mark Kingdon’s Kingdon Capital also initiated a $4.6 million position during the quarter. The other funds with new positions in the stock are Vishal Saluja and Pham Quang’s Endurant Capital Management, Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund, and Anand Parekh’s Alyeska Investment Group.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Praxis Precision Medicines, Inc. (NASDAQ:PRAX) but similarly valued. We will take a look at Allot Ltd. (NASDAQ:ALLT), Gladstone Land Corporation (NASDAQ:LAND), 17 Education & Technology Group Inc. (NASDAQ:YQ), Consolidated Communications Holdings Inc (NASDAQ:CNSL), Sierra Wireless, Inc. (NASDAQ:SWIR), SpartanNash Company (NASDAQ:SPTN), and Verastem Inc (NASDAQ:VSTM). This group of stocks’ market valuations are similar to PRAX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $181 million in PRAX’s case. Verastem Inc (NASDAQ:VSTM) is the most popular stock in this table. On the other hand Gladstone Land Corporation (NASDAQ:LAND) is the least popular one with only 6 bullish hedge fund positions. Praxis Precision Medicines, Inc. (NASDAQ:PRAX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRAX is 83.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on PRAX as the stock returned 20% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.