Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Exagen Inc. (NASDAQ:XGN) from the perspective of those elite funds.
Is Exagen Inc. (NASDAQ:XGN) undervalued? Hedge funds are taking an optimistic view. The number of bullish hedge fund bets moved up by 6 in recent months. Our calculations also showed that XGN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). XGN was in 6 hedge funds’ portfolios at the end of September. There were 0 hedge funds in our database with XGN positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are assumed to be underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at present, Our researchers choose to focus on the elite of this club, about 750 funds. It is estimated that this group of investors watch over bulk of the smart money’s total asset base, and by observing their highest performing stock picks, Insider Monkey has deciphered numerous investment strategies that have historically defeated Mr. Market. 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 May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s check out the recent hedge fund action surrounding Exagen Inc. (NASDAQ:XGN).
What does smart money think about Exagen Inc. (NASDAQ:XGN)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6 from the second quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in XGN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Farallon Capital was the largest shareholder of Exagen Inc. (NASDAQ:XGN), with a stake worth $5.6 million reported as of the end of September. Trailing Farallon Capital was Broadfin Capital, which amassed a stake valued at $4.8 million. Sio Capital, Alyeska Investment Group, and Millennium Management 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 Broadfin Capital allocated the biggest weight to Exagen Inc. (NASDAQ:XGN), around 0.89% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, setting aside 0.42 percent of its 13F equity portfolio to XGN.
Now, key money managers were breaking ground themselves. Farallon Capital, initiated the biggest position in Exagen Inc. (NASDAQ:XGN). Farallon Capital had $5.6 million invested in the company at the end of the quarter. Kevin Kotler’s Broadfin Capital also initiated a $4.8 million position during the quarter. The other funds with new positions in the stock are Michael Castor’s Sio Capital, Anand Parekh’s Alyeska Investment Group, and Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks similar to Exagen Inc. (NASDAQ:XGN). We will take a look at China Distance Education Hldgs Ltd (NYSE:DL), Sol-Gel Technologies Ltd. (NASDAQ:SLGL), RYB Education, Inc. (NYSE:RYB), and Genesis Healthcare Inc (NYSE:GEN). This group of stocks’ market caps match XGN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DL | 1 | 1852 | -1 |
| SLGL | 3 | 10404 | 0 |
| RYB | 4 | 12884 | 0 |
| GEN | 4 | 5403 | -2 |
| Average | 3 | 7636 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $14 million in XGN’s case. RYB Education, Inc. (NYSE:RYB) is the most popular stock in this table. On the other hand China Distance Education Hldgs Ltd (NYSE:DL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Exagen Inc. (NASDAQ:XGN) is more popular among hedge funds. 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. Hedge funds were also right about betting on XGN as the stock returned 15.2% during the first two months of Q4 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.
Disclosure: None. This article was originally published at Insider Monkey.