Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. An average long/short hedge fund returned only 5% due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' stock picks rather than directly investing in hedge funds. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Intrexon Corp (NASDAQ:XON).
Intrexon Corp (NASDAQ:XON) has seen an increase in hedge fund interest lately. XON was in 10 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 9 hedge funds in our database with XON positions at the end of the previous quarter. Our calculations also showed that xon isn't among the 30 most popular stocks among hedge funds.
If you'd ask most stock holders, hedge funds are assumed to be unimportant, old financial tools of years past. While there are more than 8000 funds with their doors open at present, Our experts choose to focus on the aristocrats of this club, about 750 funds. These investment experts oversee the lion's share of the hedge fund industry's total asset base, and by observing their top investments, Insider Monkey has found a few investment strategies that have historically exceeded the broader indices. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let's take a look at the key hedge fund action regarding Intrexon Corp (NASDAQ:XON).
How have hedgies been trading Intrexon Corp (NASDAQ:XON)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in XON a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Iridian Asset Management was the largest shareholder of Intrexon Corp (NASDAQ:XON), with a stake worth $24.9 million reported as of the end of December. Trailing Iridian Asset Management was Balyasny Asset Management, which amassed a stake valued at $0.7 million. Springbok Capital, Horizon Asset Management, and Laurion Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in Intrexon Corp (NASDAQ:XON). Balyasny Asset Management had $0.7 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Israel Englander's Millennium Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Intrexon Corp (NASDAQ:XON) but similarly valued. These stocks are C&J Energy Services, Inc (NYSE:CJ), NCI Building Systems, Inc. (NYSE:NCS), Coeur Mining, Inc. (NYSE:CDE), and Third Point Reinsurance Ltd (NYSE:TPRE). This group of stocks' market valuations are closest to XON's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CJ,25,254818,0 NCS,20,74692,-8 CDE,13,44363,0 TPRE,18,52264,4 Average,19,106534,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $29 million in XON's case. C&J Energy Services, Inc (NYSE:CJ) is the most popular stock in this table. On the other hand Coeur Mining, Inc. (NYSE:CDE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Intrexon Corp (NASDAQ:XON) is even less popular than CDE. Hedge funds dodged a bullet by taking a bearish stance towards XON. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately XON wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); XON investors were disappointed as the stock returned -36.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.