The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Codexis, Inc. (NASDAQ:CDXS) based on those filings.
Codexis, Inc. (NASDAQ:CDXS) was in 8 hedge funds' portfolios at the end of March. CDXS has seen a decrease in hedge fund interest in recent months. There were 10 hedge funds in our database with CDXS holdings at the end of the previous quarter. Our calculations also showed that CDXS 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_670993" align="aligncenter" width="399"] Wil Harkey of Nantahala Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Now let's analyze the recent hedge fund action encompassing Codexis, Inc. (NASDAQ:CDXS).
How have hedgies been trading Codexis, Inc. (NASDAQ:CDXS)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CDXS over the last 18 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in Codexis, Inc. (NASDAQ:CDXS) was held by Nantahala Capital Management, which reported holding $59.9 million worth of stock at the end of September. It was followed by Casdin Capital with a $56.6 million position. Other investors bullish on the company included Vivo Capital, Opaleye Management, and Prescott Group Capital Management. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to Codexis, Inc. (NASDAQ:CDXS), around 6.01% of its 13F portfolio. Opaleye Management is also relatively very bullish on the stock, earmarking 4.14 percent of its 13F equity portfolio to CDXS.
Seeing as Codexis, Inc. (NASDAQ:CDXS) has witnessed falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of fund managers who sold off their positions entirely in the first quarter. At the top of the heap, Israel Englander's Millennium Management sold off the largest position of the "upper crust" of funds followed by Insider Monkey, worth an estimated $3.2 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund cut about $1.1 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds in the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Codexis, Inc. (NASDAQ:CDXS) but similarly valued. These stocks are Amerant Bancorp Inc. (NASDAQ:AMTB), Front Yard Residential Corporation (NYSE:RESI), Carolina Financial Corporation (NASDAQ:CARO), and Opera Limited (NASDAQ:OPRA). This group of stocks' market valuations are similar to CDXS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMTB,2,5943,0 RESI,13,49548,-1 CARO,10,25235,1 OPRA,6,5060,-9 Average,7.75,21447,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $151 million in CDXS's case. Front Yard Residential Corporation (NYSE:RESI) is the most popular stock in this table. On the other hand Amerant Bancorp Inc. (NASDAQ:AMTB) is the least popular one with only 2 bullish hedge fund positions. Codexis, Inc. (NASDAQ:CDXS) 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 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately CDXS wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CDXS were disappointed as the stock returned -3.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.