Applied Genetic Technologies Corp (AGTC): Are Hedge Funds Right About This Stock?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Applied Genetic Technologies Corp (NASDAQ:AGTC) from the perspective of those successful funds.

Hedge fund interest in Applied Genetic Technologies Corp (NASDAQ:AGTC) shares was flat during the third quarter. This is usually a negative indicator. 12 hedge funds that we track owned the stock on September 30, same as on June 30. 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 ARC Document Solutions Inc (NYSE:ARC), Travelzoo Inc. (NASDAQ:TZOO), and Allot Communications Ltd. (NASDAQ:ALLT) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

What does the smart money think about Applied Genetic Technologies Corp (NASDAQ:AGTC)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the second quarter of 2016. On the other hand, there were a total of 19 hedge funds with a bullish position in AGTC at the beginning of this year, so hedge fund ownership has fallen drastically. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Joseph Edelman’s Perceptive Advisors has the number one position in Applied Genetic Technologies Corp (NASDAQ:AGTC), worth close to $4.2 million. Sitting at the No. 2 spot is Millennium Management, one of the 10 largest hedge funds in the world, which holds a $3.4 million position. Other peers that are bullish consist of Nathan Fischel’s DAFNA Capital Management, Jim Simons’ Renaissance Technologies, and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dropped their positions entirely. At the top of the heap, Stuart Weisbrod’s Iguana Healthcare Management dropped the largest stake of all the investors watched by Insider Monkey, valued at an estimated $1.4 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund said goodbye to about $0.1 million worth of shares.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Applied Genetic Technologies Corp (NASDAQ:AGTC) but similarly valued. We will take a look at ARC Document Solutions Inc (NYSE:ARC), Travelzoo Inc. (NASDAQ:TZOO), Allot Communications Ltd. (NASDAQ:ALLT), and Northrim BanCorp, Inc. (NASDAQ:NRIM). All of these stocks’ market caps are closest to AGTC’s market cap.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $15 million in AGTC’s case. ARC Document Solutions Inc (NYSE:ARC) is the most popular stock in this table. On the other hand Northrim BanCorp, Inc. (NASDAQ:NRIM) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Applied Genetic Technologies Corp (NASDAQ:AGTC) 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.

Disclosure: None