EXACT Sciences Corporation (EXAS): Are Hedge Funds Right About This Stock?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of EXACT Sciences Corporation (NASDAQ:EXAS).

EXACT Sciences Corporation (NASDAQ:EXAS) was in 41 hedge funds’ portfolios at the end of March. The all time high for this statistic is 43. EXAS has experienced an increase in enthusiasm from smart money recently. There were 40 hedge funds in our database with EXAS positions at the end of the fourth quarter. Our calculations also showed that EXAS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Cathie Wood of ARK Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to go over the fresh hedge fund action encompassing EXACT Sciences Corporation (NASDAQ:EXAS).

Do Hedge Funds Think EXAS Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in EXAS 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.

Among these funds, ARK Investment Management held the most valuable stake in EXACT Sciences Corporation (NASDAQ:EXAS), which was worth $1205.6 million at the end of the fourth quarter. On the second spot was Casdin Capital which amassed $311 million worth of shares. Zevenbergen Capital Investments, Suvretta Capital Management, and Eminence 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 Casdin Capital allocated the biggest weight to EXACT Sciences Corporation (NASDAQ:EXAS), around 9.26% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, setting aside 7.18 percent of its 13F equity portfolio to EXAS.

As aggregate interest increased, key money managers have been driving this bullishness. Perceptive Advisors, managed by Joseph Edelman, assembled the biggest position in EXACT Sciences Corporation (NASDAQ:EXAS). Perceptive Advisors had $46.6 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $33.9 million investment in the stock during the quarter. The following funds were also among the new EXAS investors: Bobby Yazdani and Babak Poushanchi’s Cota Capital, Matthew Hulsizer’s PEAK6 Capital Management, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.

Let’s now take a look at hedge fund activity in other stocks similar to EXACT Sciences Corporation (NASDAQ:EXAS). These stocks are Paycom Software Inc (NYSE:PAYC), Nokia Corporation (NYSE:NOK), Edison International (NYSE:EIX), McCormick & Company, Incorporated (NYSE:MKC), PPL Corporation (NYSE:PPL), Equifax Inc. (NYSE:EFX), and Cerner Corporation (NASDAQ:CERN). All of these stocks’ market caps resemble EXAS’s market cap.

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As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $1231 million. That figure was $2409 million in EXAS’s case. Paycom Software Inc (NYSE:PAYC) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 21 bullish hedge fund positions. EXACT Sciences Corporation (NASDAQ:EXAS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EXAS is 74.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately EXAS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EXAS were disappointed as the stock returned -4% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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