At Insider Monkey, we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Axovant Sciences Ltd (NYSE:AXON) a bargain? The best stock pickers are getting less bullish. The number of long hedge fund bets fell by 6 in recent months. 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 Plexus Corp. (NASDAQ:PLXS), Super Micro Computer, Inc. (NASDAQ:SMCI), and Franklin Electric Co. (NASDAQ:FELE) to gather more data points.
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In the financial world there are plenty of indicators shareholders put to use to assess their stock investments. Some of the most under-the-radar indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outperform their index-focused peers by a superb margin (see the details here).
Keeping this in mind, let’s analyze the key action surrounding Axovant Sciences Ltd (NYSE:AXON).
How have hedgies been trading Axovant Sciences Ltd (NYSE:AXON)?
Heading into Q4, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Daniel Gold’s QVT Financial has the largest position in Axovant Sciences Ltd (NYSE:AXON), worth close to $969 million, corresponding to 33.2% of its total 13F portfolio. Coming in second is Visium Asset Management, managed by Jacob Gottlieb, which holds a $66.7 million position; 0.9% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish contain Peter Kolchinsky’s RA Capital Management, D. E. Shaw’s D E Shaw and James E. Flynn’s Deerfield Management.
Due to the fact that Axovant Sciences Ltd (NYSE:AXON) has experienced falling interest from the smart money, logic holds that there is a sect of hedgies that decided to sell off their positions entirely last quarter. Interestingly, Christopher James’s Partner Fund Management cut the biggest position of the 700 funds watched by Insider Monkey, comprising close to $19.4 million in stock. Richard Gerson and Navroz D. Udwadia’s fund, Falcon Edge Capital, also dumped its stock, about $17.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 6 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Axovant Sciences Ltd (NYSE:AXON) but similarly valued. These stocks are Plexus Corp. (NASDAQ:PLXS), Super Micro Computer, Inc. (NASDAQ:SMCI), Franklin Electric Co. (NASDAQ:FELE), and TransAlta Corporation (USA) (NYSE:TAC). This group of stocks’ market valuations are closest to AXON’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLXS | 15 | 108007 | 0 |
| SMCI | 14 | 64887 | 0 |
| FELE | 10 | 89550 | -2 |
| TAC | 6 | 86098 | 1 |
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. In AXON, hedge funds reported stakes worth $1.15 billion in aggregate. Plexus Corp. (NASDAQ:PLXS) is the most popular stock in this table, while TransAlta Corporation (USA) (NYSE:TAC) is the least popular one with only 6 bullish hedge fund positions. Axovant Sciences Ltd (NYSE:AXON) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PLXS might be a better candidate to consider a long position.
