The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Accelerate Diagnostics Inc (NASDAQ:AXDX) from the perspective of those elite funds.
Is Accelerate Diagnostics Inc (NASDAQ:AXDX) the right pick for your portfolio? Money managers are taking a bearish view. The number of bullish hedge fund bets retreated by 1 lately. Our calculations also showed that AXDX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the recent hedge fund action surrounding Accelerate Diagnostics Inc (NASDAQ:AXDX).
How have hedgies been trading Accelerate Diagnostics Inc (NASDAQ:AXDX)?
At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AXDX over the last 16 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Birchview Capital held the most valuable stake in Accelerate Diagnostics Inc (NASDAQ:AXDX), which was worth $50 million at the end of the second quarter. On the second spot was Selkirk Management which amassed $8 million worth of shares. Moreover, Citadel Investment Group, Citadel Investment Group, and OZ Management were also bullish on Accelerate Diagnostics Inc (NASDAQ:AXDX), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Accelerate Diagnostics Inc (NASDAQ:AXDX) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their entire stakes heading into Q3. It's worth mentioning that Steve Cohen's Point72 Asset Management dumped the largest investment of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $1.2 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Accelerate Diagnostics Inc (NASDAQ:AXDX) but similarly valued. These stocks are OceanFirst Financial Corp. (NASDAQ:OCFC), PRA Group, Inc. (NASDAQ:PRAA), Frank's International NV (NYSE:FI), and Esperion Therapeutics, Inc. (NASDAQ:ESPR). This group of stocks' market caps are closest to AXDX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OCFC,13,64180,0 PRAA,8,27127,-3 FI,15,26617,3 ESPR,16,253729,2 Average,13,92913,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $66 million in AXDX's case. Esperion Therapeutics, Inc. (NASDAQ:ESPR) is the most popular stock in this table. On the other hand PRA Group, Inc. (NASDAQ:PRAA) is the least popular one with only 8 bullish hedge fund positions. Accelerate Diagnostics Inc (NASDAQ:AXDX) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AXDX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AXDX investors were disappointed as the stock returned -18.8% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.