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Abraxas Petroleum Corp. (AXAS): Are Hedge Funds Right About This Stock?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets, hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Abraxas Petroleum Corp. (NASDAQ:AXAS).

Is Abraxas Petroleum Corp. (NASDAQ:AXAS) a buy right now? The best stock pickers are becoming more confident. The number of long hedge fund bets improved by 2 lately. Abraxas Petroleum Corp. (NASDAQ:AXAS) was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. There were 8 hedge funds in our database with Abraxas Petroleum Corp. (NASDAQ:AXAS) positions at the end of the previous quarter. At the end of this article, we will also compare Abraxas Petroleum Corp. (NASDAQ:AXAS) to other stocks, including Pioneer Energy Services Corp (NYSE:PES), Dynamic Materials Corporation (NASDAQ:BOOM), and AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) to get a better sense of its popularity.

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In today’s marketplace, there are several metrics investors can use to grade stocks. A pair of the most useful metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outpace the broader indices by a significant margin (see the details here).

Keeping this in mind, let’s take a look at the latest action regarding Abraxas Petroleum Corp. (NASDAQ:AXAS).

What does the smart money think about Abraxas Petroleum Corp. (NASDAQ:AXAS)?

Heading into Q4, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 25% from the second quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Coe Capital Management, managed by Mark Coe, holds the biggest position in Abraxas Petroleum Corp. (NASDAQ:AXAS). Coe Capital Management has a $1.4 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $1.1 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. The remaining peers with similar optimism encompass D E Shaw, Anand Parekh’s Alyeska Investment Group, and Renaissance Technologies.

As aggregate interest increased, some big names have been driving this bullishness. D E Shaw assembled the biggest position in Abraxas Petroleum Corp. (NASDAQ:AXAS). D E Shaw had $0.5 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Tewksbury’s Stevens Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Abraxas Petroleum Corp. (NASDAQ:AXAS) but similarly valued. These stocks are Pioneer Energy Services Corp (NYSE:PES), Dynamic Materials Corporation (NASDAQ:BOOM), AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), and Cherokee Inc. (NASDAQ:CHKE). All of these stocks’ market caps resemble Abraxas Petroleum Corp. (NASDAQ:AXAS)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PES 12 5468 -3
BOOM 9 22606 2
ACRX 10 28555 -2
CHKE 8 38993 -2

As you can see, these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $4 million in Abraxas Petroleum Corp. (NASDAQ:AXAS)’s case. Pioneer Energy Services Corp (NYSE:PES) is the most popular stock in this table. On the other hand, Cherokee Inc. (NASDAQ:CHKE) is the least popular one with only 8 bullish hedge fund positions. Abraxas Petroleum Corp. (NASDAQ:AXAS) 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. In this regard, Pioneer Energy Services Corp (NYSE:PES) might be a better candidate to consider a long position.

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