Is Abraxas Petroleum (AXAS) A Good Stock To Buy Now?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Abraxas Petroleum Corp. (NASDAQ:AXAS), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Abraxas Petroleum (AXAS) a good stock to buy now? AXAS was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 15. AXAS has seen a decrease in hedge fund interest recently. There were 10 hedge funds in our database with AXAS holdings at the end of June. Our calculations also showed that AXAS isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind let’s review the fresh hedge fund action surrounding Abraxas Petroleum Corp. (NASDAQ:AXAS).

Hedge fund activity in Abraxas Petroleum Corp. (NASDAQ:AXAS)

At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in AXAS a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, Arrowstreet Capital held the most valuable stake in Abraxas Petroleum Corp. (NASDAQ:AXAS), which was worth $0.1 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $0.1 million worth of shares. Citadel Investment Group, LMR Partners, 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 Winton Capital Management allocated the biggest weight to Abraxas Petroleum Corp. (NASDAQ:AXAS), around 0.0023% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, designating 0.0002 percent of its 13F equity portfolio to AXAS.

Seeing as Abraxas Petroleum Corp. (NASDAQ:AXAS) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that elected to cut their entire stakes last quarter. Intriguingly, Donald Sussman’s Paloma Partners dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $0.2 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $0.1 million worth. These moves are important to note, as total hedge fund interest dropped by 5 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Abraxas Petroleum Corp. (NASDAQ:AXAS) but similarly valued. We will take a look at Alimera Sciences Inc (NASDAQ:ALIM), Salem Media Group Inc. (NASDAQ:SALM), Psychemedics Corp. (NASDAQ:PMD), J. Jill, Inc. (NYSE:JILL), Midatech Pharma PLC (NASDAQ:MTP), Charles & Colvard, Ltd. (NASDAQ:CTHR), and Navios Maritime Holdings Inc. (NYSE:NM). This group of stocks’ market caps resemble AXAS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALIM 6 4298 1
SALM 2 424 0
PMD 4 3002 0
JILL 3 795 -5
MTP 1 275 0
CTHR 1 1314 -1
NM 2 1452 -1
Average 2.7 1651 -0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.7 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $0 million in AXAS’s case. Alimera Sciences Inc (NASDAQ:ALIM) is the most popular stock in this table. On the other hand Midatech Pharma PLC (NASDAQ:MTP) is the least popular one with only 1 bullish hedge fund positions. Abraxas Petroleum Corp. (NASDAQ:AXAS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AXAS is 50. 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 positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and beat the market again by 16.1 percentage points. Unfortunately AXAS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AXAS were disappointed as the stock returned -13.7% since the end of September (through 11/27) 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 many of these stocks already outperformed the market so far this year.

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