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Is AxoGen, Inc. (AXGN) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of AxoGen, Inc. (NASDAQ:AXGN) based on that data and determine whether they were really smart about the stock.

Is AxoGen, Inc. (NASDAQ:AXGN) a buy right now? Prominent investors were becoming less hopeful. The number of long hedge fund positions were cut by 5 recently. Our calculations also showed that AXGN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). AXGN was in 10 hedge funds' portfolios at the end of March. There were 15 hedge funds in our database with AXGN positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are tons of tools shareholders can use to evaluate their holdings. A pair of the most useful tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top investment managers can outclass their index-focused peers by a very impressive amount (see the details here).

[caption id="attachment_364894" align="aligncenter" width="392"]

James Flynn Deerfield Management
James Flynn Deerfield Management

James E. Flynn of Deerfield Management[/caption]

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a glance at the key hedge fund action regarding AxoGen, Inc. (NASDAQ:AXGN).

How are hedge funds trading AxoGen, Inc. (NASDAQ:AXGN)?

At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AXGN over the last 18 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mitchell Blutt's Consonance Capital Management has the number one position in AxoGen, Inc. (NASDAQ:AXGN), worth close to $37.1 million, comprising 2.8% of its total 13F portfolio. Sitting at the No. 2 spot is Deerfield Management, led by James E. Flynn, holding a $9.8 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish contain D. E. Shaw's D E Shaw, Israel Englander's Millennium Management and George McCabe's Portolan Capital Management. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to AxoGen, Inc. (NASDAQ:AXGN), around 2.76% of its 13F portfolio. Soleus Capital is also relatively very bullish on the stock, dishing out 0.91 percent of its 13F equity portfolio to AXGN.

Judging by the fact that AxoGen, Inc. (NASDAQ:AXGN) has witnessed a decline in interest from the smart money, it's easy to see that there lies a certain "tier" of fund managers who were dropping their full holdings last quarter. It's worth mentioning that James A. Silverman's Opaleye Management said goodbye to the biggest position of all the hedgies watched by Insider Monkey, worth an estimated $12.5 million in stock. Mark Coe's fund, Intrinsic Edge Capital, also dropped its stock, about $4.6 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds last quarter.

Let's go over hedge fund activity in other stocks similar to AxoGen, Inc. (NASDAQ:AXGN). These stocks are Prevail Therapeutics Inc. (NASDAQ:PRVL), Vericel Corp (NASDAQ:VCEL), Twin River Worldwide Holdings Inc. (NYSE:TRWH), and The First of Long Island Corporation (NASDAQ:FLIC). This group of stocks' market caps are similar to AXGN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRVL,12,269275,4 VCEL,18,70625,-7 TRWH,13,83082,-2 FLIC,12,31326,3 Average,13.75,113577,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $62 million in AXGN's case. Vericel Corp (NASDAQ:VCEL) is the most popular stock in this table. On the other hand Prevail Therapeutics Inc. (NASDAQ:PRVL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks AxoGen, Inc. (NASDAQ:AXGN) is even less popular than PRVL. Hedge funds dodged a bullet by taking a bearish stance towards AXGN. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately AXGN wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); AXGN investors were disappointed as the stock returned -11.2% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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

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