Is Axon Enterprise, Inc. (AAXN) 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 October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 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 Axon Enterprise, Inc. (NASDAQ:AAXN).

Axon Enterprise, Inc. (NASDAQ:AAXN) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. AAXN was in 16 hedge funds’ portfolios at the end of June. There were 19 hedge funds in our database with AAXN positions at the end of the previous quarter. Our calculations also showed that AAXN isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are assumed to be worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open today, Our researchers hone in on the moguls of this club, approximately 750 funds. These hedge fund managers direct most of all hedge funds’ total capital, and by observing their highest performing stock picks, Insider Monkey has unsheathed many investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Colin Moran Abdiel Capital

Colin Moran Abdiel Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the latest hedge fund action surrounding Axon Enterprise, Inc. (NASDAQ:AAXN).

What does smart money think about Axon Enterprise, Inc. (NASDAQ:AAXN)?

At Q2’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AAXN over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

No of Hedge Funds with AAXN Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Colin Moran’s Abdiel Capital Advisors has the largest position in Axon Enterprise, Inc. (NASDAQ:AAXN), worth close to $119.5 million, comprising 7.6% of its total 13F portfolio. The second most bullish fund manager is Broadwood Capital, managed by Neal C. Bradsher, which holds a $48.8 million position; the fund has 6.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Brian Ashford-Russell and Tim Woolley’s Polar Capital, Israel Englander’s Millennium Management and Dmitry Balyasny’s Balyasny Asset Management.

Seeing as Axon Enterprise, Inc. (NASDAQ:AAXN) has witnessed declining sentiment from the smart money, it’s easy to see that there exists a select few funds who sold off their full holdings heading into Q3. At the top of the heap, Andrew Sandler’s Sandler Capital Management cut the biggest investment of the 750 funds watched by Insider Monkey, valued at close to $8.9 million in stock, and Richard S. Meisenberg’s ACK Asset Management was right behind this move, as the fund dumped about $3.8 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to Axon Enterprise, Inc. (NASDAQ:AAXN). These stocks are AutoNation, Inc. (NYSE:AN), F.N.B. Corporation (NYSE:FNB), Transocean Ltd (NYSE:RIG), and United Bankshares, Inc. (NASDAQ:UBSI). This group of stocks’ market caps resemble AAXN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AN 22 402713 1
FNB 19 85551 -4
RIG 31 494387 -6
UBSI 14 26711 6
Average 21.5 252341 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $252 million. That figure was $250 million in AAXN’s case. Transocean Ltd (NYSE:RIG) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 14 bullish hedge fund positions. Axon Enterprise, Inc. (NASDAQ:AAXN) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AAXN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AAXN investors were disappointed as the stock returned -11.6% during the third quarter 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 in 2019.

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