Axsome Therapeutics, Inc. (AXSM): Are Hedge Funds Done Buying?

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 first 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 4.5 years and analyze what the smart money thinks of Axsome Therapeutics, Inc. (NASDAQ:AXSM) based on that data.

Axsome Therapeutics, Inc. (NASDAQ:AXSM) was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. AXSM investors should be aware of a decrease in hedge fund interest lately. There were 25 hedge funds in our database with AXSM holdings at the end of the previous quarter. Our calculations also showed that AXSM isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Kolchinsky of RA Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the latest hedge fund action surrounding Axsome Therapeutics, Inc. (NASDAQ:AXSM).

What have hedge funds been doing with Axsome Therapeutics, Inc. (NASDAQ:AXSM)?

Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in AXSM a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in Axsome Therapeutics, Inc. (NASDAQ:AXSM) was held by RA Capital Management, which reported holding $112 million worth of stock at the end of September. It was followed by Iridian Asset Management with a $69 million position. Other investors bullish on the company included Baker Bros. Advisors, Citadel Investment Group, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Acuta Capital Partners allocated the biggest weight to Axsome Therapeutics, Inc. (NASDAQ:AXSM), around 8.8% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, earmarking 3.54 percent of its 13F equity portfolio to AXSM.

Because Axsome Therapeutics, Inc. (NASDAQ:AXSM) has faced declining sentiment from hedge fund managers, it’s easy to see that there exists a select few hedgies who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Farallon Capital said goodbye to the biggest investment of the 750 funds watched by Insider Monkey, comprising about $45.7 million in stock. Arthur B Cohen and Joseph Healey’s fund, Healthcor Management LP, also dumped its stock, about $42.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to Axsome Therapeutics, Inc. (NASDAQ:AXSM). We will take a look at MyoKardia, Inc. (NASDAQ:MYOK), GrafTech International Ltd. (NYSE:EAF), Allakos Inc. (NASDAQ:ALLK), and Cohen & Steers, Inc. (NYSE:CNS). This group of stocks’ market caps match AXSM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MYOK 33 562366 7
EAF 23 126467 -10
ALLK 12 207018 -3
CNS 20 67034 4
Average 22 240721 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $458 million in AXSM’s case. MyoKardia, Inc. (NASDAQ:MYOK) is the most popular stock in this table. On the other hand Allakos Inc. (NASDAQ:ALLK) is the least popular one with only 12 bullish hedge fund positions. Axsome Therapeutics, Inc. (NASDAQ:AXSM) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on AXSM as the stock returned 33.3% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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