Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Intrexon Corp (NYSE:XON).
Is Intrexon Corp (NYSE:XON) a buy right now? Hedge funds are taking a pessimistic view. The number of bullish hedge fund positions retreated by 4 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as NuStar Energy L.P. (NYSE:NS), Thoratec Corporation (NASDAQ:THOR), and Allied World Assurance Co Holdings, AG. (NYSE:AWH) to gather more data points.
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According to most market participants, hedge funds are perceived as slow, old financial vehicles of years past. While there are greater than an 8000 funds trading today, Our experts look at the moguls of this group, around 700 funds. These investment experts administer bulk of all hedge funds’ total capital, and by keeping track of their unrivaled picks, Insider Monkey has discovered a few investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, we’re going to take a gander at the recent action encompassing Intrexon Corp (NYSE:XON).
What have hedge funds been doing with Intrexon Corp (NYSE:XON)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 19% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the most valuable position in Intrexon Corp (NYSE:XON). The fund has reported a $60.2 million position in the stock at the end of September, comprising 0.5% of its 13F portfolio. The second largest stake is held by Dan Loeb of Third Point, with a $47.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Ken Griffin’s Citadel Investment Group, James Dinan’s York Capital Management and John Thiessen’s Vertex One Asset Management.
Due to the fact that Intrexon Corp (NYSE:XON) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of fund managers who were dropping their full holdings last quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the biggest position of all the hedgies followed by Insider Monkey, totaling about $4.5 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund dumped about $3.2 million worth of XON shares. These moves are interesting, as aggregate hedge fund interest fell by 4 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Intrexon Corp (NYSE:XON). These stocks are NuStar Energy L.P. (NYSE:NS), Thoratec Corporation (NASDAQ:THOR), Allied World Assurance Co Holdings, AG. (NYSE:AWH), and Vectren Corporation (NYSE:VVC). This group of stocks’ market valuations are similar to XON’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NS | 11 | 53485 | -1 |
| THOR | 31 | 574280 | 0 |
| AWH | 28 | 259365 | 4 |
| VVC | 10 | 70086 | -3 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $206 million in XON’s case. Thoratec Corporation (NASDAQ:THOR) is the most popular stock in this table. On the other hand Vectren Corporation (NYSE:VVC) is the least popular one with only 10 bullish hedge fund positions. Intrexon Corp (NYSE:XON) 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. In this regard THOR might be a better candidate to consider a long position.
