Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Axiall Corp (NYSE:AXLL).
Axiall Corp (NYSE:AXLL) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 30 hedge funds’ portfolios at the end of the third quarter of 2015. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Benchmark Electronics, Inc. (NYSE:BHE), Emergent Biosolutions Inc (NYSE:EBS), and Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) to gather more data points.
Follow Axiall Corp (NYSE:AXLL)
Follow Axiall Corp (NYSE:AXLL)
Keeping this in mind, we’re going to take a gander at the key action regarding Axiall Corp (NYSE:AXLL).
Hedge fund activity in Axiall Corp (NYSE:AXLL)
When looking at the institutional investors followed by Insider Monkey, Eric W. Mandelblatt’s Soroban Capital Partners has the biggest position in Axiall Corp (NYSE:AXLL), worth close to $82.4 million, amounting to 0.6% of its total 13F portfolio. On Soroban Capital Partners’s heels is D E Shaw, with a $44 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions include Don Morgan’s Brigade Capital, Israel Englander’s Millennium Management and Stephen V. Raneri’s LionEye Capital Management.
Since Axiall Corp (NYSE:AXLL) has faced falling interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that Lee Ainslie’s Maverick Capital dropped the largest investment of all the hedgies tracked by Insider Monkey, totaling close to $36.7 million in stock, and Kevin D. Eng’s Columbus Hill Capital Management was right behind this move, as the fund cut about $16.1 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Axiall Corp (NYSE:AXLL) but similarly valued. We will take a look at Benchmark Electronics, Inc. (NYSE:BHE), Emergent Biosolutions Inc (NYSE:EBS), Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), and Sykes Enterprises, Incorporated (NASDAQ:SYKE). This group of stocks’ market valuations are similar to AXLL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHE | 20 | 207574 | 4 |
| EBS | 17 | 154819 | 1 |
| LXRX | 17 | 48280 | 1 |
| SYKE | 16 | 81477 | -1 |
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $270 million in AXLL’s case. Benchmark Electronics, Inc. (NYSE:BHE) is the most popular stock in this table. On the other hand Sykes Enterprises, Incorporated (NASDAQ:SYKE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Axiall Corp (NYSE:AXLL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
