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Is Axovant Gene Therapies Ltd. (AXGT) Going to Burn These Hedge Funds?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Axovant Gene Therapies Ltd. (NASDAQ:AXGT) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Axovant Gene Therapies Ltd. (NASDAQ:AXGT) ready to rally soon? The smart money is taking an optimistic view. The number of long hedge fund positions rose by 3 lately. Our calculations also showed that AXGT isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Flynn Deerfield Management

We’re going to check out the recent hedge fund action regarding Axovant Gene Therapies Ltd. (NASDAQ:AXGT).

What have hedge funds been doing with Axovant Gene Therapies Ltd. (NASDAQ:AXGT)?

Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in AXGT 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.

AXGT_june2019

According to Insider Monkey’s hedge fund database, James E. Flynn’s Deerfield Management has the number one position in Axovant Gene Therapies Ltd. (NASDAQ:AXGT), worth close to $5.3 million, corresponding to 0.2% of its total 13F portfolio. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $3.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish consist of Ken Griffin’s Citadel Investment Group, Efrem Kamen’s Pura Vida Investments and Vishal Saluja and Pham Quang’s Endurant Capital Management.

As industrywide interest jumped, specific money managers have been driving this bullishness. Pura Vida Investments, managed by Efrem Kamen, established the most outsized position in Axovant Gene Therapies Ltd. (NASDAQ:AXGT). Pura Vida Investments had $2 million invested in the company at the end of the quarter. Vishal Saluja and Pham Quang’s Endurant Capital Management also initiated a $1.9 million position during the quarter. The following funds were also among the new AXGT investors: Warren Lammert’s Granite Point Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Michael Gelband’s ExodusPoint Capital.

Let’s now review hedge fund activity in other stocks similar to Axovant Gene Therapies Ltd. (NASDAQ:AXGT). These stocks are Maxwell Technologies Inc. (NASDAQ:MXWL), electroCore, Inc. (NASDAQ:ECOR), Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), and SB One Bancorp (NASDAQ:SBBX). All of these stocks’ market caps are closest to AXGT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MXWL 12 44867 5
ECOR 3 4112 0
SPWH 17 34537 2
SBBX 5 17646 1
Average 9.25 25291 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $21 million in AXGT’s case. Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is the most popular stock in this table. On the other hand electroCore, Inc. (NASDAQ:ECOR) is the least popular one with only 3 bullish hedge fund positions. Axovant Gene Therapies Ltd. (NASDAQ:AXGT) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AXGT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AXGT were disappointed as the stock returned -47.6% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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