Is Agile Therapeutics Inc (AGRX) A Good Stock To Buy?

A market correction in the third quarter, spurred by a number of global macroeconomic concerns ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 14 percentage points between June 25 and the end of October. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Agile Therapeutics Inc (NASDAQ:AGRX) during the quarter.

Is Agile Therapeutics Inc (NASDAQ:AGRX) a good stock to buy now? Prominent investors seem to be reducing their bets on the stock. The number of long hedge fund bets (among the investors we track) inched down by one during the third quarter. However, 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 Century Casinos, Inc. (NASDAQ:CNTY), J Alexander’s Holdings Inc (NYSE:JAX), and Harmony Merger Corp (NASDAQ:HRMNU) to gather more data points.

To most investors, hedge funds are perceived as unimportant, outdated investment vehicles of the past. While there are over an 8000 funds trading at present, We look at the leaders of this group, approximately 700 funds. Most estimates calculate that this group of people have their hands on the lion’s share of the smart money’s total asset base, and by tailing their first-class investments, Insider Monkey has unsheathed a number of investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to take a peek at the new action regarding Agile Therapeutics Inc (NASDAQ:AGRX).

Hedge fund activity in Agile Therapeutics Inc (NASDAQ:AGRX)

At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, amassing stakes with a total value of $42 million. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Aisling Capital, managed by Dennis Purcell, holds the largest position in Agile Therapeutics Inc (NASDAQ:AGRX). Aisling Capital has a $20.1 million position in the stock, comprising 3.5% of its 13F portfolio. On Aisling Capital’s heels is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $9.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Peter Kolchinsky’s RA Capital Management, James A. Silverman’s Opaleye Management and Chuck Royce’s Royce & Associates.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified AGRX as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Agile Therapeutics Inc (NASDAQ:AGRX) but similarly valued. We will take a look at Century Casinos, Inc. (NASDAQ:CNTY), J Alexander’s Holdings Inc (NYSE:JAX), Harmony Merger Corp (NASDAQ:HRMNU), and Resource America Inc (NASDAQ:REXI). All of these stocks’ market caps match AGRX’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $25 million, which is lower than the aggregate value of the funds’ holdings in Agile Therapeutics. J Alexander’s Holdings Inc (NYSE:JAX) is the most popular stock in this table, while Harmony Merger Corp (NASDAQ:HRMNU) is the least popular one with only 6 bullish hedge fund positions. Agile Therapeutics Inc (NASDAQ:AGRX) 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. In this regard JAX might be a better candidate to consider a long position.