Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Axcelis Technologies Inc (NASDAQ:ACLS) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of September. At the end of this article we will also compare ACLS to other stocks including ChemoCentryx Inc (NASDAQ:CCXI), Huami Corporation (NYSE:HMI), and Peoples Utah Bancorp (NASDAQ:PUB) to get a better sense of its popularity.
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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a peek at the new hedge fund action encompassing Axcelis Technologies Inc (NASDAQ:ACLS).
How are hedge funds trading Axcelis Technologies Inc (NASDAQ:ACLS)?
Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, no change from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in ACLS over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Rima Senvest Management, managed by Richard Mashaal, holds the most valuable position in Axcelis Technologies Inc (NASDAQ:ACLS). Rima Senvest Management has a $35.8 million position in the stock, comprising 2.7% of its 13F portfolio. Sitting at the No. 2 spot is Tenzing Global Investors, managed by Chet Kapoor, which holds a $7.9 million position; the fund has 4.4% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions encompass John Overdeck and David Siegel’s Two Sigma Advisors, Jim Simons’s Renaissance Technologies and Cliff Asness’s AQR Capital Management.
Seeing as Axcelis Technologies Inc (NASDAQ:ACLS) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of funds that decided to sell off their positions entirely by the end of the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group dumped the largest position of the 700 funds watched by Insider Monkey, worth about $1.7 million in stock. Peter Algert and Kevin Coldiron’s fund, Algert Coldiron Investors, also cut its stock, about $0.8 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Axcelis Technologies Inc (NASDAQ:ACLS). We will take a look at ChemoCentryx Inc (NASDAQ:CCXI), Huami Corporation (NYSE:HMI), Peoples Utah Bancorp (NASDAQ:PUB), and CEVA, Inc. (NASDAQ:CEVA). This group of stocks’ market values are similar to ACLS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCXI | 18 | 139138 | 3 |
| HMI | 4 | 4997 | 0 |
| PUB | 3 | 19643 | -2 |
| CEVA | 7 | 22422 | -2 |
| Average | 8 | 46550 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $63 million in ACLS’s case. ChemoCentryx Inc (NASDAQ:CCXI) is the most popular stock in this table. On the other hand Peoples Utah Bancorp (NASDAQ:PUB) is the least popular one with only 3 bullish hedge fund positions. Axcelis Technologies Inc (NASDAQ:ACLS) 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 CCXI might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
