Is Axon Enterprise, Inc. (AAXN) A Good Stock To Buy?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Axon Enterprise, Inc. (NASDAQ:AAXN) based on those filings.

Is Axon Enterprise, Inc. (NASDAQ:AAXN) the right investment to pursue these days? Money managers are getting more optimistic. The number of bullish hedge fund bets advanced by 1 recently. Our calculations also showed that AAXN isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

Colin Moran Abdiel Capital

Colin Moran of Abdiel Capital Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the recent hedge fund action regarding Axon Enterprise, Inc. (NASDAQ:AAXN).

How are hedge funds trading Axon Enterprise, Inc. (NASDAQ:AAXN)?

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the fourth quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in AAXN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AAXN A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Colin Moran’s Abdiel Capital Advisors has the number one position in Axon Enterprise, Inc. (NASDAQ:AAXN), worth close to $172.3 million, amounting to 8.1% of its total 13F portfolio. On Abdiel Capital Advisors’s heels is Brian Ashford-Russell and Tim Woolley of Polar Capital, with a $55.1 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions consist of Neal C. Bradsher’s Broadwood Capital, Bryan Hinmon’s Motley Fool Asset Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Axon Enterprise, Inc. (NASDAQ:AAXN), around 8.06% of its 13F portfolio. Broadwood Capital is also relatively very bullish on the stock, setting aside 6.29 percent of its 13F equity portfolio to AAXN.

As one would reasonably expect, some big names have jumped into Axon Enterprise, Inc. (NASDAQ:AAXN) headfirst. PDT Partners, managed by Peter Muller, assembled the most valuable position in Axon Enterprise, Inc. (NASDAQ:AAXN). PDT Partners had $9 million invested in the company at the end of the quarter.Renaissance Technologies also made a $8.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard S. Meisenberg’s ACK Asset Management, Greg Eisner’s Engineers Gate Manager, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Axon Enterprise, Inc. (NASDAQ:AAXN) but similarly valued. These stocks are Owens Corning (NYSE:OC), Kimco Realty Corp (NYSE:KIM), Arrow Electronics, Inc. (NYSE:ARW), and Invesco Ltd. (NYSE:IVZ). This group of stocks’ market valuations are similar to AAXN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OC 30 398573 -17
KIM 22 55233 6
ARW 23 359067 -11
IVZ 26 114502 2
Average 25.25 231844 -5

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $232 million. That figure was $413 million in AAXN’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 22 bullish hedge fund positions. Axon Enterprise, Inc. (NASDAQ:AAXN) 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 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately AAXN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AAXN were disappointed as the stock returned 7.3% during the same time period 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 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.