After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Transenterix Inc (NYSE:TRXC).
Hedge fund interest in Transenterix Inc (NYSE:TRXC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare TRXC to other stocks including Paratek Pharmaceuticals Inc (NASDAQ:PRTK), Veru Inc. (NASDAQ:VERU), and Pixelworks, Inc. (NASDAQ:PXLW) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the key hedge fund action regarding Transenterix Inc (NYSE:TRXC).
How are hedge funds trading Transenterix Inc (NYSE:TRXC)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in TRXC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Masters Capital Management was the largest shareholder of Transenterix Inc (NYSE:TRXC), with a stake worth $2.2 million reported as of the end of September. Trailing Masters Capital Management was Aisling Capital, which amassed a stake valued at $1.5 million. Luminus Management, Millennium Management, and Sculptor Capital 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 Aisling Capital allocated the biggest weight to Transenterix Inc (NYSE:TRXC), around 3.27% of its 13F portfolio. Masters Capital Management is also relatively very bullish on the stock, dishing out 0.13 percent of its 13F equity portfolio to TRXC.
Since Transenterix Inc (NYSE:TRXC) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds who sold off their full holdings heading into Q4. Intriguingly, Ken Griffin’s Citadel Investment Group dumped the biggest investment of the 750 funds watched by Insider Monkey, totaling about $0.2 million in stock. Cliff Asness’s fund, AQR Capital Management, also sold off its stock, about $0.2 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Transenterix Inc (NYSE:TRXC) but similarly valued. These stocks are Paratek Pharmaceuticals Inc (NASDAQ:PRTK), Veru Inc. (NASDAQ:VERU), Pixelworks, Inc. (NASDAQ:PXLW), and Concert Pharmaceuticals Inc (NASDAQ:CNCE). All of these stocks’ market caps match TRXC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $6 million in TRXC’s case. Paratek Pharmaceuticals Inc (NASDAQ:PRTK) is the most popular stock in this table. On the other hand Veru Inc. (NASDAQ:VERU) is the least popular one with only 5 bullish hedge fund positions. Transenterix Inc (NYSE:TRXC) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TRXC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TRXC were disappointed as the stock returned -67.7% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.