Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in AxoGen, Inc. (NASDAQ:AXGN)? The smart money sentiment can provide an answer to this question.
Is AxoGen, Inc. (NASDAQ:AXGN) going to take off soon? Investors who are in the know are in a pessimistic mood. The number of long hedge fund bets fell by 4 recently. Our calculations also showed that AXGN isn't among the 30 most popular stocks among hedge funds (see the video below). AXGN was in 15 hedge funds' portfolios at the end of June. There were 19 hedge funds in our database with AXGN positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are seen as underperforming, outdated investment vehicles of years past. While there are greater than 8000 funds in operation at present, Our experts look at the crème de la crème of this club, approximately 750 funds. Most estimates calculate that this group of people manage most of all hedge funds' total capital, and by observing their unrivaled picks, Insider Monkey has spotted many investment strategies that have historically beaten the market. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's take a peek at the new hedge fund action surrounding AxoGen, Inc. (NASDAQ:AXGN).
What have hedge funds been doing with AxoGen, Inc. (NASDAQ:AXGN)?
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the first quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in AXGN a year ago. With hedgies' capital changing hands, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Opaleye Management was the largest shareholder of AxoGen, Inc. (NASDAQ:AXGN), with a stake worth $17.8 million reported as of the end of March. Trailing Opaleye Management was Deerfield Management, which amassed a stake valued at $17.6 million. Rock Springs Capital Management, D E Shaw, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that AxoGen, Inc. (NASDAQ:AXGN) has experienced bearish sentiment from hedge fund managers, we can see that there were a few hedgies who sold off their positions entirely in the second quarter. Interestingly, Efrem Kamen's Pura Vida Investments dropped the largest position of the "upper crust" of funds watched by Insider Monkey, worth about $6.8 million in stock, and Constantinos J. Christofilis's Archon Capital Management was right behind this move, as the fund cut about $2.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds in the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as AxoGen, Inc. (NASDAQ:AXGN) but similarly valued. These stocks are Ambac Financial Group, Inc. (NASDAQ:AMBC), QuinStreet Inc (NASDAQ:QNST), Construction Partners, Inc. (NASDAQ:ROAD), and Domo Inc. (NASDAQ:DOMO). This group of stocks' market values match AXGN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMBC,14,112980,-5 QNST,21,218559,-4 ROAD,6,14752,-2 DOMO,14,129781,-7 Average,13.75,119018,-4.5 [/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 $119 million. That figure was $98 million in AXGN's case. QuinStreet Inc (NASDAQ:QNST) is the most popular stock in this table. On the other hand Construction Partners, Inc. (NASDAQ:ROAD) is the least popular one with only 6 bullish hedge fund positions. AxoGen, Inc. (NASDAQ:AXGN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AXGN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AXGN were disappointed as the stock returned -37% during the third 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.