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Hedge Funds Flop On Athersys, Console Themselves With Soaring MaxLinear

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MaxLinear, Inc. (NYSE:MXL) and Athersys, Inc. (NASDAQ:ATHX) are two of the day’s hottest stocks, and they are also two stocks that couldn’t have had more contrasting hedge fund sentiment in the second quarter. Let’s dig into the gains these two stocks have made today and gauge where they might be headed in the future.

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Whether elite hedge funds collectively like a stock or not is an important metric to consider, as these large investors show a great level of skill and expertise when it comes to picking stocks. Over the last few years equity hedge funds have trailed the market by a large margin, but that’s mostly due to their hedging and short positions, which perform poorly in a bull market. Their long positions performed far better, especially their small-cap picks, which have the potential to beat the market by 95 basis points per month on average, as our backtests showed. Our small-cap strategy involves imitating a portfolio of the 15 most popular small-cap picks among hedge funds and it has returned 118% since August 2012, beating the S&P 500 ETF (SPY) by over 60 percentage points (read more details here).

Let’s start with Athersys, Inc. (NASDAQ:ATHX), which appears to be making monster gains today primarily due to an article published on before the markets opened this morning, touting the stock as one of five priced at less than $10 that could be poised for a breakout based on trading activity in the stock. As the article points out, the biopharmaceutical company, which is developing treatments that can extend or enhance the quality of one’s life, has wilted under intense selling pressure since mid-April, having fallen by over 59% from April 13 until yesterday’s close. However, the stock pushed above its 20-day and 50-day moving averages yesterday towards a region where it may be poised for a larger breakout.

Hedge funds tracked by Insider Monkey were among the market participants putting selling pressure on the stock in the second quarter, as all four firms which had a long position in the stock on March 31 had sold out of it by June 30. While the majority of those positions were small, First Eagle Investment Management did close a position of over 807,000 shares valued at more than $2.3 million as of March 31. Despite the stock having quickly crumbled in April and presenting a potentially intriguing entry point, not a single fund we track took up a long position in the stock by June 30. Shares of Athersys, Inc. (NASDAQ:ATHX) are up by over 12% today and over 16% in the third quarter.

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