10x Genomics, Inc. (TXG): Hedge Funds Taking Some Chips Off The Table

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of 10x Genomics, Inc. (NASDAQ:TXG) based on that data and determine whether they were really smart about the stock.

10x Genomics, Inc. (NASDAQ:TXG) has seen a decrease in hedge fund interest in recent months. 10x Genomics, Inc. (NASDAQ:TXG) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistics is 20. There were 20 hedge funds in our database with TXG holdings at the end of March. Our calculations also showed that TXG isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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 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.

Samuel Isaly Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to view the new hedge fund action surrounding 10x Genomics, Inc. (NASDAQ:TXG).

What does smart money think about 10x Genomics, Inc. (NASDAQ:TXG)?

Heading into the third quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TXG over the last 20 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, 12 West Capital Management held the most valuable stake in 10x Genomics, Inc. (NASDAQ:TXG), which was worth $128.2 million at the end of the third quarter. On the second spot was JS Capital which amassed $94.9 million worth of shares. Renaissance Technologies, OrbiMed Advisors, and PDT Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position JS Capital allocated the biggest weight to 10x Genomics, Inc. (NASDAQ:TXG), around 7.17% of its 13F portfolio. 12 West Capital Management is also relatively very bullish on the stock, setting aside 6.62 percent of its 13F equity portfolio to TXG.

Judging by the fact that 10x Genomics, Inc. (NASDAQ:TXG) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few hedge funds that elected to cut their full holdings in the second quarter. Interestingly, Joseph Edelman’s Perceptive Advisors dropped the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $13.8 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund cut about $6.7 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds in the second quarter.

Let’s also examine hedge fund activity in other stocks similar to 10x Genomics, Inc. (NASDAQ:TXG). We will take a look at Crown Holdings, Inc. (NYSE:CCK), Fastly, Inc. (NYSE:FSLY), Cna Financial Corporation (NYSE:CNA), NiSource Inc. (NYSE:NI), Equitable Holdings, Inc. (NYSE:EQH), RenaissanceRe Holdings Ltd. (NYSE:RNR), and Clarivate Plc (NYSE:CCC). All of these stocks’ market caps match TXG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCK 51 1239713 -5
FSLY 27 1662391 5
CNA 12 48476 0
NI 21 300585 -6
EQH 39 1111581 12
RNR 41 870861 11
CCC 45 1300868 17
Average 33.7 933496 4.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.7 hedge funds with bullish positions and the average amount invested in these stocks was $933 million. That figure was $313 million in TXG’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Cna Financial Corporation (NYSE:CNA) is the least popular one with only 12 bullish hedge fund positions. 10x Genomics, Inc. (NASDAQ:TXG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TXG is 41.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on TXG as the stock returned 39.6% in the third quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.