U.S. Markets open in 3 hrs 8 mins

Anixter International Inc. (AXE): Hedge Funds Cashed Out Too Early

Nina Todic

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Anixter International Inc. (NYSE:AXE) makes for a good investment right now.

Anixter International Inc. (NYSE:AXE) shareholders have witnessed a decrease in support from the world's most elite money managers of late. AXE was in 20 hedge funds' portfolios at the end of the second quarter of 2019. There were 23 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 (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce

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 take a look at the fresh hedge fund action encompassing Anixter International Inc. (NYSE:AXE).

Hedge fund activity in Anixter International Inc. (NYSE:AXE)

At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in AXE over the last 16 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

No of Hedge Funds with AXE Positions

More specifically, Pzena Investment Management was the largest shareholder of Anixter International Inc. (NYSE:AXE), with a stake worth $110.7 million reported as of the end of March. Trailing Pzena Investment Management was Ariel Investments, which amassed a stake valued at $45.6 million. Fisher Asset Management, Royce & Associates, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Anixter International Inc. (NYSE:AXE) has experienced falling interest from the aggregate hedge fund industry, it's safe to say that there is a sect of fund managers who sold off their entire stakes in the second quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital cut the largest stake of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $4.3 million in stock. Israel Englander's fund, Millennium Management, also said goodbye to its stock, about $0.6 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds in the second quarter.

Let's also examine hedge fund activity in other stocks similar to Anixter International Inc. (NYSE:AXE). These stocks are LexinFintech Holdings Ltd. (NASDAQ:LX), Builders FirstSource, Inc. (NASDAQ:BLDR), ProAssurance Corporation (NYSE:PRA), and Meritor Inc (NYSE:MTOR). This group of stocks' market caps are closest to AXE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LX,15,77654,2 BLDR,35,418210,-2 PRA,15,183901,1 MTOR,23,329539,5 Average,22,252326,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $252 million. That figure was $258 million in AXE's case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand LexinFintech Holdings Ltd. (NASDAQ:LX) is the least popular one with only 15 bullish hedge fund positions. Anixter International Inc. (NYSE:AXE) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on AXE as the stock returned 15.8% during the same time frame and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content