Is Intrexon Corp (NASDAQ:XON) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Intrexon Corp (NASDAQ:XON) investors should be aware of an increase in support from the world’s most elite money managers lately. XON was in 12 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with XON holdings at the end of the previous quarter. Our calculations also showed that XON isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s analyze the key hedge fund action regarding Intrexon Corp (NASDAQ:XON).
How are hedge funds trading Intrexon Corp (NASDAQ:XON)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in XON a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Intrexon Corp (NASDAQ:XON) was held by Miller Value Partners, which reported holding $48.1 million worth of stock at the end of September. It was followed by MSDC Management with a $5.7 million position. Other investors bullish on the company included GMT Capital, Millennium Management, and Iridian Asset Management. In terms of the portfolio weights assigned to each position Miller Value Partners allocated the biggest weight to Intrexon Corp (NASDAQ:XON), around 1.94% of its 13F portfolio. MSDC Management is also relatively very bullish on the stock, earmarking 0.77 percent of its 13F equity portfolio to XON.
Now, some big names were leading the bulls’ herd. HBK Investments, managed by David Costen Haley, established the biggest position in Intrexon Corp (NASDAQ:XON). HBK Investments had $0.4 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are Joel Greenblatt’s Gotham Asset Management and Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Intrexon Corp (NASDAQ:XON) but similarly valued. We will take a look at Palomar Holdings, Inc. (NASDAQ:PLMR), American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), GasLog Partners LP (NYSE:GLOP), and US Concrete Inc (NASDAQ:USCR). All of these stocks’ market caps are similar to XON’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $62 million in XON’s case. American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) is the most popular stock in this table. On the other hand GasLog Partners LP (NYSE:GLOP) is the least popular one with only 6 bullish hedge fund positions. Intrexon Corp (NASDAQ:XON) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately XON wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); XON investors were disappointed as the stock returned -2.6% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.