After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Axonics Modulation Technologies, Inc. (NASDAQ:AXNX).
Is Axonics Modulation Technologies, Inc. (NASDAQ:AXNX) the right investment to pursue these days? The smart money is taking a bearish view. The number of bullish hedge fund bets shrunk by 1 in recent months. Our calculations also showed that AXNX 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_27676" align="aligncenter" width="355"] Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's go over the new hedge fund action regarding Axonics Modulation Technologies, Inc. (NASDAQ:AXNX).
How have hedgies been trading Axonics Modulation Technologies, Inc. (NASDAQ:AXNX)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AXNX over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cormorant Asset Management was the largest shareholder of Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), with a stake worth $32.9 million reported as of the end of September. Trailing Cormorant Asset Management was Redmile Group, which amassed a stake valued at $21.8 million. Citadel Investment Group, Millennium Management, and Partner Fund Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cormorant Asset Management allocated the biggest weight to Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), around 2% of its 13F portfolio. Redmile Group is also relatively very bullish on the stock, earmarking 0.73 percent of its 13F equity portfolio to AXNX.
Because Axonics Modulation Technologies, Inc. (NASDAQ:AXNX) has faced falling interest from the smart money, logic holds that there lies a certain "tier" of fund managers that slashed their positions entirely by the end of the third quarter. Interestingly, Joseph Edelman's Perceptive Advisors cut the biggest stake of the "upper crust" of funds tracked by Insider Monkey, worth close to $11.7 million in stock. Efrem Kamen's fund, Pura Vida Investments, also dropped its stock, about $2.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Axonics Modulation Technologies, Inc. (NASDAQ:AXNX). These stocks are Virtus Investment Partners Inc (NASDAQ:VRTS), Forestar Group Inc. (NYSE:FOR), The Providence Service Corporation (NASDAQ:PRSC), and Diamond Offshore Drilling Inc (NYSE:DO). This group of stocks' market valuations match AXNX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRTS,16,94591,-1 FOR,15,99738,11 PRSC,15,174593,1 DO,14,43842,1 Average,15,103191,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $94 million in AXNX's case. Virtus Investment Partners Inc (NASDAQ:VRTS) is the most popular stock in this table. On the other hand Diamond Offshore Drilling Inc (NYSE:DO) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Axonics Modulation Technologies, Inc. (NASDAQ:AXNX) is even less popular than DO. Hedge funds dodged a bullet by taking a bearish stance towards AXNX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AXNX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AXNX investors were disappointed as the stock returned -9.4% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.