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Is Abraxas Petroleum Corp. (AXAS) Going To Burn These Hedge Funds ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Abraxas Petroleum Corp. (NASDAQ:AXAS).

Is Abraxas Petroleum Corp. (NASDAQ:AXAS) the right investment to pursue these days? The smart money is taking a pessimistic view. The number of long hedge fund positions dropped by 1 recently. 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 below for Q2 rankings). AXAS was in 8 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with AXAS holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Nathaniel August - Mangrove Partners

Nathaniel August of Mangrove Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the latest hedge fund action surrounding Abraxas Petroleum Corp. (NASDAQ:AXAS).

What have hedge funds been doing with Abraxas Petroleum Corp. (NASDAQ:AXAS)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AXAS over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Mangrove Partners held the most valuable stake in Abraxas Petroleum Corp. (NASDAQ:AXAS), which was worth $4.5 million at the end of the third quarter. On the second spot was Portolan Capital Management which amassed $2.9 million worth of shares. AQR Capital Management, D E Shaw, 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 Mangrove Partners allocated the biggest weight to Abraxas Petroleum Corp. (NASDAQ:AXAS), around 0.55% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to AXAS.

Judging by the fact that Abraxas Petroleum Corp. (NASDAQ:AXAS) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers who were dropping their full holdings by the end of the third quarter. Interestingly, David Harding’s Winton Capital Management dropped the biggest position of all the hedgies tracked by Insider Monkey, worth close to $0.2 million in stock. Robert B. Gillam’s fund, McKinley Capital Management, also sold off its stock, about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Abraxas Petroleum Corp. (NASDAQ:AXAS). These stocks are Aduro BioTech Inc (NASDAQ:ADRO), NeuBase Therapeutics, Inc. (NASDAQ:NBSE), Randolph Bancorp, Inc. (NASDAQ:RNDB), and Portman Ridge Finance Corporation (NASDAQ:PTMN). 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
ADRO 9 6771 1
NBSE 2 8962 0
RNDB 2 6691 0
PTMN 3 1093 -1
Average 4 5879 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $10 million in AXAS’s case. Aduro BioTech Inc (NASDAQ:ADRO) is the most popular stock in this table. On the other hand NeuBase Therapeutics, Inc. (NASDAQ:NBSE) is the least popular one with only 2 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. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 -49% during the fourth quarter (through the end of November) 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.

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

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