Should You Buy Applied Genetic Technologies Corp (AGTC)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Applied Genetic Technologies Corp (NASDAQ:AGTC) and determine whether the smart money was really smart about this stock.

Applied Genetic Technologies Corp (NASDAQ:AGTC) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that AGTC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Today there are many formulas stock traders employ to value stocks. Two of the most underrated formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outclass their index-focused peers by a very impressive margin (see the details here).

Nathan Fischel DAFNA Capital

Nathan Fischel of DAFNA Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the latest hedge fund action regarding Applied Genetic Technologies Corp (NASDAQ:AGTC).

How are hedge funds trading Applied Genetic Technologies Corp (NASDAQ:AGTC)?

At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 71% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in AGTC a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

The largest stake in Applied Genetic Technologies Corp (NASDAQ:AGTC) was held by Renaissance Technologies, which reported holding $4.6 million worth of stock at the end of September. It was followed by DAFNA Capital Management with a $3.8 million position. Other investors bullish on the company included Millennium Management, Stonepine Capital, and Farallon Capital. In terms of the portfolio weights assigned to each position Stonepine Capital allocated the biggest weight to Applied Genetic Technologies Corp (NASDAQ:AGTC), around 2.04% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, designating 1.59 percent of its 13F equity portfolio to AGTC.

Consequently, key money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, initiated the most valuable position in Applied Genetic Technologies Corp (NASDAQ:AGTC). Millennium Management had $2.7 million invested in the company at the end of the quarter. Timothy P. Lynch’s Stonepine Capital also made a $1.9 million investment in the stock during the quarter. The other funds with brand new AGTC positions are Farallon Capital, George McCabe’s Portolan Capital Management, and Ken Greenberg and David Kim’s Ghost Tree Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Applied Genetic Technologies Corp (NASDAQ:AGTC) but similarly valued. These stocks are AgroFresh Solutions Inc (NASDAQ:AGFS), Cedar Realty Trust Inc (NYSE:CDR), ESSA Pharma Inc. (NASDAQ:EPIX), and Checkpoint Therapeutics, Inc. (NASDAQ:CKPT). This group of stocks’ market values resemble AGTC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AGFS 4 926 -2
CDR 9 4554 1
EPIX 4 27728 -1
CKPT 3 157 1
Average 5 8341 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $22 million in AGTC’s case. Cedar Realty Trust Inc (NYSE:CDR) is the most popular stock in this table. On the other hand Checkpoint Therapeutics, Inc. (NASDAQ:CKPT) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Applied Genetic Technologies Corp (NASDAQ:AGTC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on AGTC as the stock returned 68.9% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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