Is Transenterix Inc (NYSEMKT:TRXC) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Transenterix Inc (NYSEMKT:TRXC) was in 14 hedge funds’ portfolios at the end of September. TRXC shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. There were 11 hedge funds in our database with TRXC holdings at the end of the previous quarter. Our calculations also showed that TRXC isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to take a gander at the fresh hedge fund action regarding Transenterix Inc (NYSEMKT:TRXC).
What does the smart money think about Transenterix Inc (NYSEMKT:TRXC)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards TRXC over the last 13 quarters. 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, Aisling Capital was the largest shareholder of Transenterix Inc (NYSEMKT:TRXC), with a stake worth $13.9 million reported as of the end of September. Trailing Aisling Capital was Masters Capital Management, which amassed a stake valued at $5.8 million. OZ Management, Citadel Investment Group, and PEAK6 Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds have jumped into Transenterix Inc (NYSEMKT:TRXC) headfirst. OZ Management, managed by Daniel S. Och, created the biggest position in Transenterix Inc (NYSEMKT:TRXC). OZ Management had $2.8 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $2 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s also examine hedge fund activity in other stocks similar to Transenterix Inc (NYSEMKT:TRXC). These stocks are Carbonite Inc (NASDAQ:CARB), Cellectis SA (NASDAQ:CLLS), Emerald Expositions Events, Inc. (NYSE:EEX), and FB Financial Corporation (NYSE:FBK). All of these stocks’ market caps are similar to TRXC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CARB | 17 | 183901 | 0 |
| CLLS | 13 | 66403 | -2 |
| EEX | 10 | 11933 | 5 |
| FBK | 10 | 131713 | -2 |
| Average | 12.5 | 98488 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $31 million in TRXC’s case. Carbonite Inc (NASDAQ:CARB) is the most popular stock in this table. On the other hand Emerald Expositions Events, Inc. (NYSE:EEX) is the least popular one with only 10 bullish hedge fund positions. Transenterix Inc (NYSEMKT: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. In this regard CARB might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
