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Axovant Gene Therapies Ltd. (AXGT): Hedge Funds In Wait-and-See Mode

Asma UL Husna

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 September 30. In this article, we will use that wealth of knowledge to determine whether or not Axovant Gene Therapies Ltd. (NASDAQ:AXGT) makes for a good investment right now.

Axovant Gene Therapies Ltd. (NASDAQ:AXGT) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds' portfolios at the end of the third quarter of 2019. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT), Nabriva Therapeutics plc (NASDAQ:NBRV), and Lineage Cell Therapeutics, Inc. (NYSE:LCTX) to gather more data points. Our calculations also showed that AXGT 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.

5 Most Popular Stocks Among Hedge Funds

In the eyes of most shareholders, hedge funds are viewed as worthless, outdated investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, Our experts hone in on the upper echelon of this club, around 750 funds. It is estimated that this group of investors preside over bulk of all hedge funds' total asset base, and by paying attention to their top stock picks, Insider Monkey has discovered several investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_340081" align="aligncenter" width="450"] Phill Gross of Adage Capital 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 as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to go over the key hedge fund action surrounding Axovant Gene Therapies Ltd. (NASDAQ:AXGT).

What have hedge funds been doing with Axovant Gene Therapies Ltd. (NASDAQ:AXGT)?

Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AXGT over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Axovant Gene Therapies Ltd. (NASDAQ:AXGT) was held by Citadel Investment Group, which reported holding $4.1 million worth of stock at the end of September. It was followed by Hudson Bay Capital Management with a $3.2 million position. Other investors bullish on the company included Renaissance Technologies, Adage Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Hudson Bay Capital Management allocated the biggest weight to Axovant Gene Therapies Ltd. (NASDAQ:AXGT), around 0.09% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.0023 percent of its 13F equity portfolio to AXGT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Winton Capital Management).

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Axovant Gene Therapies Ltd. (NASDAQ:AXGT) but similarly valued. These stocks are Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT), Nabriva Therapeutics plc (NASDAQ:NBRV), Lineage Cell Therapeutics, Inc. (NYSE:LCTX), and Scully Royalty Ltd. (NYSE:SRL). This group of stocks' market values are closest to AXGT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARCT,7,6040,2 NBRV,11,31629,1 LCTX,5,33651,0 SRL,2,10530,0 Average,6.25,20463,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $10 million in AXGT's case. Nabriva Therapeutics plc (NASDAQ:NBRV) is the most popular stock in this table. On the other hand Scully Royalty Ltd. (NYSE:SRL) is the least popular one with only 2 bullish hedge fund positions. Axovant Gene Therapies Ltd. (NASDAQ:AXGT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately AXGT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AXGT investors were disappointed as the stock returned -16.3% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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