The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Axos Financial, Inc. (NYSE:AX) and determine whether the smart money was really smart about this stock.
Axos Financial, Inc. (NYSE:AX) investors should pay attention to a decrease in support from the world's most elite money managers recently. AX was in 12 hedge funds' portfolios at the end of March. There were 15 hedge funds in our database with AX positions at the end of the previous quarter. Our calculations also showed that AX 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). Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_735636" align="aligncenter" width="399"] Matthew Lindenbaum of Basswood Capital[/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 we're going to view the new hedge fund action encompassing Axos Financial, Inc. (NYSE:AX).
How have hedgies been trading Axos Financial, Inc. (NYSE:AX)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AX over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Basswood Capital, managed by Matthew Lindenbaum, holds the biggest position in Axos Financial, Inc. (NYSE:AX). Basswood Capital has a $20.5 million position in the stock, comprising 2.4% of its 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $5.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, D. E. Shaw's D E Shaw and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to Axos Financial, Inc. (NYSE:AX), around 2.4% of its 13F portfolio. Voss Capital is also relatively very bullish on the stock, designating 1.55 percent of its 13F equity portfolio to AX.
Judging by the fact that Axos Financial, Inc. (NYSE:AX) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that elected to cut their entire stakes in the first quarter. It's worth mentioning that Noam Gottesman's GLG Partners said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, comprising about $8.4 million in stock. Brandon Haley's fund, Holocene Advisors, also dropped its stock, about $1.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds in the first quarter.
Let's now review hedge fund activity in other stocks similar to Axos Financial, Inc. (NYSE:AX). We will take a look at Heartland Financial USA Inc (NASDAQ:HTLF), James River Group Holdings Ltd (NASDAQ:JRVR), Aurora Cannabis Inc. (NYSE:ACB), and Tricida, Inc. (NASDAQ:TCDA). This group of stocks' market values match AX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HTLF,6,6048,-2 JRVR,13,72712,3 ACB,9,12761,-3 TCDA,24,462077,0 Average,13,138400,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $138 million. That figure was $43 million in AX's case. Tricida, Inc. (NASDAQ:TCDA) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 6 bullish hedge fund positions. Axos Financial, Inc. (NYSE:AX) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds 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 beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on AX, though not to the same extent, as the stock returned 21.8% during the second quarter and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.