Is AXT Inc (AXTI) A Good Stock To Buy ?

Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: AXT Inc (NASDAQ:AXTI).

Is AXT Inc (NASDAQ:AXTI) a first-rate investment now? The best stock pickers are taking a bullish view. The number of bullish hedge fund bets went up by 2 recently. Our calculations also showed that axti isn’t among the 30 most popular stocks among hedge funds. AXTI was in 9 hedge funds’ portfolios at the end of March. There were 7 hedge funds in our database with AXTI holdings at the end of the previous quarter.

According to most traders, hedge funds are seen as unimportant, old financial tools of the past. While there are greater than 8000 funds in operation today, Our researchers hone in on the masters of this club, around 750 funds. These investment experts control the lion’s share of the hedge fund industry’s total asset base, and by keeping track of their finest equity investments, Insider Monkey has come up with a few investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

Chuck Royce

We’re going to check out the recent hedge fund action surrounding AXT Inc (NASDAQ:AXTI).

How have hedgies been trading AXT Inc (NASDAQ:AXTI)?

Heading into the second quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in AXTI a year ago. 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 stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with AXTI Positions

Among these funds, Royce & Associates held the most valuable stake in AXT Inc (NASDAQ:AXTI), which was worth $10.6 million at the end of the first quarter. On the second spot was Raging Capital Management which amassed $3.2 million worth of shares. Moreover, Manatuck Hill Partners, Ancora Advisors, and Ariel Investments were also bullish on AXT Inc (NASDAQ:AXTI), allocating a large percentage of their portfolios to this stock.

Now, specific money managers have jumped into AXT Inc (NASDAQ:AXTI) headfirst. Manatuck Hill Partners, managed by Mark Broach, initiated the most outsized position in AXT Inc (NASDAQ:AXTI). Manatuck Hill Partners had $1.5 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s check out hedge fund activity in other stocks similar to AXT Inc (NASDAQ:AXTI). We will take a look at Bank7 Corp. (NASDAQ:BSVN), Griffin Industrial Realty, Inc. (NASDAQ:GRIF), Rocky Brands, Inc. (NASDAQ:RCKY), and MVB Financial Corp. (NASDAQ:MVBF). All of these stocks’ market caps match AXTI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BSVN 3 10080 -4
GRIF 2 27649 0
RCKY 7 15641 1
MVBF 2 17615 0
Average 3.5 17746 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $18 million in AXTI’s case. Rocky Brands, Inc. (NASDAQ:RCKY) is the most popular stock in this table. On the other hand Griffin Industrial Realty, Inc. (NASDAQ:GRIF) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks AXT Inc (NASDAQ:AXTI) is more popular among hedge funds. 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 AXTI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AXTI were disappointed as the stock returned -7.4% 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 in Q2.

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