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Should You Buy Axovant Gene Therapies Ltd. (AXGT)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Axovant Gene Therapies Ltd. (NASDAQ:AXGT) based on that data and determine whether they were really smart about the stock.

Axovant Gene Therapies Ltd. (NASDAQ:AXGT) was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. AXGT shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 7 hedge funds in our database with AXGT positions at the end of the previous quarter. Our calculations also showed that AXGT 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.

According to most traders, hedge funds are seen as worthless, outdated financial tools of years past. While there are greater than 8000 funds trading at the moment, We choose to focus on the aristocrats of this group, about 850 funds. These money managers administer the lion’s share of the smart money’s total capital, and by shadowing their top stock picks, Insider Monkey has determined a number of investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

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. Now we’re going to view the recent hedge fund action surrounding Axovant Gene Therapies Ltd. (NASDAQ:AXGT).

How are hedge funds trading Axovant Gene Therapies Ltd. (NASDAQ:AXGT)?

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 57% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in AXGT a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Mitchell Blutt’s Consonance Capital Management has the biggest position in Axovant Gene Therapies Ltd. (NASDAQ:AXGT), worth close to $8.9 million, amounting to 0.7% of its total 13F portfolio. The second largest stake is held by Sphera Global Healthcare Fund, led by Doron Breen and Mori Arkin, holding a $7.2 million position; 0.9% of its 13F portfolio is allocated to the stock. Other peers with similar optimism encompass Sander Gerber’s Hudson Bay Capital Management, Nathan Fischel’s DAFNA Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position DAFNA Capital Management allocated the biggest weight to Axovant Gene Therapies Ltd. (NASDAQ:AXGT), around 1.04% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, designating 0.89 percent of its 13F equity portfolio to AXGT.

Now, key money managers were leading the bulls’ herd. Consonance Capital Management, managed by Mitchell Blutt, assembled the most outsized position in Axovant Gene Therapies Ltd. (NASDAQ:AXGT). Consonance Capital Management had $8.9 million invested in the company at the end of the quarter. Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund also initiated a $7.2 million position during the quarter. The following funds were also among the new AXGT investors: Nathan Fischel’s DAFNA Capital Management, David Rosen’s Rubric Capital Management, and Michael Gelband’s ExodusPoint Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Axovant Gene Therapies Ltd. (NASDAQ:AXGT) but similarly valued. These stocks are Intevac, Inc. (NASDAQ:IVAC), Aptinyx Inc. (NASDAQ:APTX), Carrols Restaurant Group, Inc. (NASDAQ:TAST), and Great Panther Mining Ltd (NYSE:GPL). All of these stocks’ market caps match AXGT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IVAC 8 15848 -1
APTX 10 24926 1
TAST 11 14256 -3
GPL 5 1963 1
Average 8.5 14248 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $27 million in AXGT’s case. Carrols Restaurant Group, Inc. (NASDAQ:TAST) is the most popular stock in this table. On the other hand Great Panther Mining Ltd (NYSE:GPL) is the least popular one with only 5 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 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 gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately AXGT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AXGT were disappointed as the stock returned 15.6% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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