Hedge Funds Are Dipping Their Toes Into Axcelis Technologies Inc (ACLS)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Axcelis Technologies Inc (NASDAQ:ACLS) and determine whether hedge funds skillfully traded this stock.

Axcelis Technologies Inc (NASDAQ:ACLS) investors should be aware of an increase in support from the world’s most elite money managers lately. Axcelis Technologies Inc (NASDAQ:ACLS) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistics is 22. Our calculations also showed that ACLS 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.

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 S&P 500 ETFs by more than 56 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. 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.

David Harding

David Harding of Winton Capital Management

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 recommended this real estate stock to our monthly premium newsletter subscribers after its stock price crashed. 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. With all of this in mind let’s view the fresh hedge fund action regarding Axcelis Technologies Inc (NASDAQ:ACLS).

What does smart money think about Axcelis Technologies Inc (NASDAQ:ACLS)?

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 54% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ACLS over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard Mashaal’s Rima Senvest Management has the number one position in Axcelis Technologies Inc (NASDAQ:ACLS), worth close to $19.9 million, accounting for 1.2% of its total 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, managed by Chuck Royce, which holds a $18.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and Chet Kapoor’s Tenzing Global Investors. In terms of the portfolio weights assigned to each position Tenzing Global Investors allocated the biggest weight to Axcelis Technologies Inc (NASDAQ:ACLS), around 3.42% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, earmarking 1.24 percent of its 13F equity portfolio to ACLS.

As industrywide interest jumped, key money managers were breaking ground themselves. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, established the most outsized position in Axcelis Technologies Inc (NASDAQ:ACLS). Shellback Capital had $6.1 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $2.6 million position during the quarter. The following funds were also among the new ACLS investors: Renaissance Technologies, Joel Greenblatt’s Gotham Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Axcelis Technologies Inc (NASDAQ:ACLS). We will take a look at G1 Therapeutics, Inc. (NASDAQ:GTHX), Sprott Inc. (NYSE:SII), Southside Bancshares, Inc. (NASDAQ:SBSI), Replimune Group, Inc. (NASDAQ:REPL), Cango Inc. (NYSE:CANG), KKR Real Estate Finance Trust Inc. (NYSE:KREF), and New Gold Inc. (NYSE:NGD). This group of stocks’ market caps are similar to ACLS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GTHX 11 47990 -2
SII 8 83998 8
SBSI 11 43015 3
REPL 11 170678 3
CANG 1 216 0
KREF 8 19507 1
NGD 11 94841 1
Average 8.7 65749 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $90 million in ACLS’s case. G1 Therapeutics, Inc. (NASDAQ:GTHX) is the most popular stock in this table. On the other hand Cango Inc. (NYSE:CANG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Axcelis Technologies Inc (NASDAQ:ACLS) is more popular among hedge funds. Our overall hedge fund sentiment score for ACLS is 37.3. 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. Unfortunately ACLS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ACLS were disappointed as the stock returned -21% during the third 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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