Is Anixter International Inc. (NYSE:AXE) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Anixter International Inc. (NYSE:AXE) was in 18 hedge funds' portfolios at the end of the third quarter of 2019. AXE has seen a decrease in enthusiasm from smart money of late. There were 20 hedge funds in our database with AXE positions at the end of the previous quarter. Our calculations also showed that AXE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_338852" align="aligncenter" width="285"] Richard S. Pzena of Pzena Investment Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to view the latest hedge fund action surrounding Anixter International Inc. (NYSE:AXE).
How have hedgies been trading Anixter International Inc. (NYSE:AXE)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in AXE a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Anixter International Inc. (NYSE:AXE) was held by Pzena Investment Management, which reported holding $126.5 million worth of stock at the end of September. It was followed by Ariel Investments with a $48.9 million position. Other investors bullish on the company included Fisher Asset Management, Royce & Associates, and D E Shaw. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Anixter International Inc. (NYSE:AXE), around 1.27% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 1.22 percent of its 13F equity portfolio to AXE.
Because Anixter International Inc. (NYSE:AXE) has witnessed falling interest from the smart money, logic holds that there was a specific group of funds who sold off their positions entirely by the end of the third quarter. It's worth mentioning that Noam Gottesman's GLG Partners dumped the largest position of all the hedgies tracked by Insider Monkey, valued at close to $3.1 million in stock. Alexander Roepers's fund, Atlantic Investment Management, also dumped its stock, about $1.8 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Anixter International Inc. (NYSE:AXE) but similarly valued. We will take a look at Domtar Corporation (NYSE:UFS), EVO Payments, Inc. (NASDAQ:EVOP), Visteon Corp (NYSE:VC), and Glaukos Corporation (NYSE:GKOS). All of these stocks' market caps are similar to AXE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UFS,21,113431,3 EVOP,15,45312,2 VC,20,416758,3 GKOS,11,69877,-4 Average,16.75,161345,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $293 million in AXE's case. Domtar Corporation (NYSE:UFS) is the most popular stock in this table. On the other hand Glaukos Corporation (NYSE:GKOS) is the least popular one with only 11 bullish hedge fund positions. Anixter International Inc. (NYSE:AXE) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on AXE as the stock returned 24.2% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.