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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Agile Therapeutics Inc (NASDAQ:AGRX)? The smart money sentiment can provide an answer to this question.
Is AGRX a good stock to buy now. Agile Therapeutics Inc (NASDAQ:AGRX) was in 9 hedge funds' portfolios at the end of September. The all time high for this statistic is 15. AGRX has experienced a decrease in support from the world's most elite money managers of late. There were 10 hedge funds in our database with AGRX positions at the end of the second quarter. Our calculations also showed that AGRX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to analyze the latest hedge fund action encompassing Agile Therapeutics Inc (NASDAQ:AGRX).
Do Hedge Funds Think AGRX Is A Good Stock To Buy Now?
At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in AGRX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Perceptive Advisors, managed by Joseph Edelman, holds the most valuable position in Agile Therapeutics Inc (NASDAQ:AGRX). Perceptive Advisors has a $48.4 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is DG Capital Management, managed by Dov Gertzulin, which holds a $3.3 million position; the fund has 2% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of John Overdeck and David Siegel's Two Sigma Advisors, and Chuck Royce's Royce & Associates. In terms of the portfolio weights assigned to each position DG Capital Management allocated the biggest weight to Agile Therapeutics Inc (NASDAQ:AGRX), around 1.99% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, setting aside 0.71 percent of its 13F equity portfolio to AGRX.
Since Agile Therapeutics Inc (NASDAQ:AGRX) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of hedge funds who sold off their positions entirely in the third quarter. Interestingly, Israel Englander's Millennium Management dumped the largest position of all the hedgies monitored by Insider Monkey, worth an estimated $1.7 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Agile Therapeutics Inc (NASDAQ:AGRX). We will take a look at NuCana plc (NASDAQ:NCNA), ORBCOMM Inc (NASDAQ:ORBC), Metacrine, Inc. (NASDAQ:MTCR), Arbutus Biopharma Corp (NASDAQ:ABUS), Liminal BioSciences Inc. (NASDAQ:LMNL), Stereotaxis Inc (NYSE:STXS), and iRadimed Corporation (NASDAQ:IRMD). This group of stocks' market valuations are closest to AGRX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NCNA,8,23107,4 ORBC,13,49298,-6 MTCR,8,25031,8 ABUS,9,9749,1 LMNL,1,34325,-1 STXS,14,107524,0 IRMD,6,33517,-3 Average,8.4,40364,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.4 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $54 million in AGRX's case. Stereotaxis Inc (NASDAQ:STXS) is the most popular stock in this table. On the other hand Liminal BioSciences Inc. (NASDAQ:LMNL) is the least popular one with only 1 bullish hedge fund positions. Agile Therapeutics Inc (NASDAQ:AGRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AGRX is 52.8. 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. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately AGRX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AGRX were disappointed as the stock returned -3% since the end of September (through 12/8) 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 this year.
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Disclosure: None. This article was originally published at Insider Monkey.