Here is What Hedge Funds Think About 10x Genomics, Inc. (TXG)

In this article we are going to use hedge fund sentiment as a tool and determine whether 10x Genomics, Inc. (NASDAQ:TXG) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is 10x Genomics, Inc. (NASDAQ:TXG) a buy right now? The smart money was taking a pessimistic view. The number of long hedge fund positions were cut by 10 lately. 10x Genomics, Inc. (NASDAQ:TXG) was in 23 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that TXG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a look at the latest hedge fund action regarding 10x Genomics, Inc. (NASDAQ:TXG).

Do Hedge Funds Think TXG Is A Good Stock To Buy Now?

At first quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TXG over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, ARK Investment Management held the most valuable stake in 10x Genomics, Inc. (NASDAQ:TXG), which was worth $634.2 million at the end of the fourth quarter. On the second spot was 12 West Capital Management which amassed $347.9 million worth of shares. JS Capital, Millennium Management, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 12 West Capital Management allocated the biggest weight to 10x Genomics, Inc. (NASDAQ:TXG), around 16.58% of its 13F portfolio. Andar Capital is also relatively very bullish on the stock, earmarking 9.16 percent of its 13F equity portfolio to TXG.

Since 10x Genomics, Inc. (NASDAQ:TXG) has experienced bearish sentiment from hedge fund managers, we can see that there is a sect of money managers that slashed their entire stakes by the end of the first quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest position of the “upper crust” of funds followed by Insider Monkey, worth close to $36.4 million in stock. Daniel Sundheim’s fund, D1 Capital Partners, also cut its stock, about $27.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 10 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as 10x Genomics, Inc. (NASDAQ:TXG) but similarly valued. We will take a look at Discovery Inc. (NASDAQ:DISCA), Trimble Inc. (NASDAQ:TRMB), M&T Bank Corporation (NYSE:MTB), Teleflex Incorporated (NYSE:TFX), KB Financial Group, Inc. (NYSE:KB), IAC/InterActiveCorp (NASDAQ:IAC), and KeyCorp (NYSE:KEY). This group of stocks’ market valuations are similar to TXG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DISCA 48 590723 20
TRMB 23 1515928 2
MTB 36 671109 3
TFX 33 571638 3
KB 9 43761 4
IAC 63 2102112 -4
KEY 41 565404 12
Average 36.1 865811 5.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $866 million. That figure was $1217 million in TXG’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 9 bullish hedge fund positions. 10x Genomics, Inc. (NASDAQ:TXG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TXG is 28.9. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately TXG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TXG investors were disappointed as the stock returned -5.4% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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