Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Hedge Funds Have Never Been This Bullish On Axsome Therapeutics, Inc. (AXSM)

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Axsome Therapeutics, Inc. (NASDAQ:AXSM) has experienced an increase in hedge fund interest recently. AXSM was in 14 hedge funds’ portfolios at the end of March. There were 6 hedge funds in our database with AXSM positions at the end of the previous quarter. Our calculations also showed that AXSM isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Kolchinsky

We’re going to take a look at the key hedge fund action regarding Axsome Therapeutics, Inc. (NASDAQ:AXSM).

How are hedge funds trading Axsome Therapeutics, Inc. (NASDAQ:AXSM)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 133% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AXSM over the last 15 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

AXSM_june2019

Of the funds tracked by Insider Monkey, Peter Kolchinsky’s RA Capital Management has the biggest position in Axsome Therapeutics, Inc. (NASDAQ:AXSM), worth close to $46.9 million, comprising 2% of its total 13F portfolio. On RA Capital Management’s heels is Baker Bros. Advisors, led by Julian Baker and Felix Baker, holding a $17.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism encompass Israel Englander’s Millennium Management, Ken Greenberg and David Kim’s Ghost Tree Capital and Benjamin A. Smith’s Laurion Capital Management.

Consequently, key money managers have been driving this bullishness. RA Capital Management, managed by Peter Kolchinsky, established the most valuable position in Axsome Therapeutics, Inc. (NASDAQ:AXSM). RA Capital Management had $46.9 million invested in the company at the end of the quarter. Julian Baker and Felix Baker’s Baker Bros. Advisors also made a $17.1 million investment in the stock during the quarter. The other funds with brand new AXSM positions are Ken Greenberg and David Kim’s Ghost Tree Capital, Benjamin A. Smith’s Laurion Capital Management, and Efrem Kamen’s Pura Vida Investments.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Axsome Therapeutics, Inc. (NASDAQ:AXSM) but similarly valued. These stocks are Mitek Systems, Inc. (NASDAQ:MITK), NVE Corporation (NASDAQ:NVEC), Flexion Therapeutics Inc (NASDAQ:FLXN), and FRP Holdings Inc (NASDAQ:FRPH). This group of stocks’ market values match AXSM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MITK 21 56038 6
NVEC 4 14236 0
FLXN 15 48039 1
FRPH 8 43576 1
Average 12 40472 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $93 million in AXSM’s case. Mitek Systems, Inc. (NASDAQ:MITK) is the most popular stock in this table. On the other hand NVE Corporation (NASDAQ:NVEC) is the least popular one with only 4 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on AXSM as the stock returned 74.1% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading...