In this article we are going to use hedge fund sentiment as a tool and determine whether Axsome Therapeutics, Inc. (NASDAQ:AXSM) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is AXSM a good stock to buy now? The best stock pickers were getting less optimistic. The number of long hedge fund bets shrunk by 11 lately. Axsome Therapeutics, Inc. (NASDAQ:AXSM) was in 20 hedge funds’ portfolios at the end of September. The all time high for this statistic is 31. Our calculations also showed that AXSM 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.
To the average investor there are several gauges shareholders use to grade their holdings. A pair of the most useful gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the S&P 500 by a superb margin (see the details here).
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. Now let’s analyze the latest hedge fund action encompassing Axsome Therapeutics, Inc. (NASDAQ:AXSM).
Do Hedge Funds Think AXSM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -35% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in AXSM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, RA Capital Management was the largest shareholder of Axsome Therapeutics, Inc. (NASDAQ:AXSM), with a stake worth $145 million reported as of the end of September. Trailing RA Capital Management was Iridian Asset Management, which amassed a stake valued at $122.8 million. Baker Bros. Advisors, Cormorant Asset Management, and Citadel Investment Group 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 Iridian Asset Management allocated the biggest weight to Axsome Therapeutics, Inc. (NASDAQ:AXSM), around 2.68% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, setting aside 2.65 percent of its 13F equity portfolio to AXSM.
Due to the fact that Axsome Therapeutics, Inc. (NASDAQ:AXSM) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedgies who were dropping their entire stakes last quarter. Interestingly, Richard Driehaus’s Driehaus Capital said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, worth close to $19.9 million in stock. Ken Greenberg and David Kim’s fund, Ghost Tree Capital, also dumped its stock, about $8.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 11 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Axsome Therapeutics, Inc. (NASDAQ:AXSM). We will take a look at Palomar Holdings, Inc. (NASDAQ:PLMR), Valmont Industries, Inc. (NYSE:VMI), BRF SA (NYSE:BRFS), Kodiak Sciences Inc (NASDAQ:KOD), Camping World Holdings, Inc. (NYSE:CWH), Alkermes Plc (NASDAQ:ALKS), and Tripadvisor Inc (NASDAQ:TRIP). This group of stocks’ market values are similar to AXSM’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $439 million in AXSM’s case. Camping World Holdings, Inc. (NYSE:CWH) is the most popular stock in this table. On the other hand Palomar Holdings, Inc. (NASDAQ:PLMR) is the least popular one with only 8 bullish hedge fund positions. Axsome Therapeutics, Inc. (NASDAQ:AXSM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AXSM is 41.9. 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. 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 December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on AXSM as the stock returned 12.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.