Last year's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards Athenex, Inc. (NASDAQ:ATNX) changed during the first quarter.
Is Athenex, Inc. (NASDAQ:ATNX) a splendid investment now? Money managers are betting on the stock. The number of long hedge fund bets improved by 5 recently. Our calculations also showed that ATNX 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_341400" align="aligncenter" width="600"] Samuel Isaly of OrbiMed Advisors[/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 take a peek at the key hedge fund action encompassing Athenex, Inc. (NASDAQ:ATNX).
What have hedge funds been doing with Athenex, Inc. (NASDAQ:ATNX)?
Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ATNX over the last 17 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, Joseph Edelman's Perceptive Advisors has the largest position in Athenex, Inc. (NASDAQ:ATNX), worth close to $130.6 million, comprising 3.5% of its total 13F portfolio. On Perceptive Advisors's heels is Behzad Aghazadeh of venBio Select Advisor, with a $71.7 million position; 3% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions comprise Samuel Isaly's OrbiMed Advisors, Israel Englander's Millennium Management and Mark Kingdon's Kingdon Capital. In terms of the portfolio weights assigned to each position Perceptive Advisors allocated the biggest weight to Athenex, Inc. (NASDAQ:ATNX), around 3.52% of its 13F portfolio. venBio Select Advisor is also relatively very bullish on the stock, dishing out 2.99 percent of its 13F equity portfolio to ATNX.
As one would reasonably expect, specific money managers were leading the bulls' herd. Ghost Tree Capital, managed by Ken Greenberg and David Kim, assembled the most outsized position in Athenex, Inc. (NASDAQ:ATNX). Ghost Tree Capital had $6.4 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.6 million position during the quarter. The other funds with brand new ATNX positions are John Overdeck and David Siegel's Two Sigma Advisors, Parvinder Thiara's Athanor Capital, and David Harding's Winton Capital Management.
Let's now review hedge fund activity in other stocks similar to Athenex, Inc. (NASDAQ:ATNX). We will take a look at Epizyme Inc (NASDAQ:EPZM), Third Point Reinsurance Ltd (NYSE:TPRE), Amphastar Pharmaceuticals Inc (NASDAQ:AMPH), and SpringWorks Therapeutics, Inc. (NASDAQ:SWTX). This group of stocks' market valuations resemble ATNX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EPZM,17,265859,-4 TPRE,19,68008,-1 AMPH,9,36976,0 SWTX,11,382035,11 Average,14,188220,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $277 million in ATNX's case. Third Point Reinsurance Ltd (NYSE:TPRE) is the most popular stock in this table. On the other hand Amphastar Pharmaceuticals Inc (NASDAQ:AMPH) is the least popular one with only 9 bullish hedge fund positions. Athenex, Inc. (NASDAQ:ATNX) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on ATNX as the stock returned 28.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.