How do we determine whether Exela Technologies, Inc. (NASDAQ:XELA) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Exela Technologies, Inc. (NASDAQ:XELA) a buy right now? The best stock pickers are becoming less hopeful. The number of long hedge fund bets shrunk by 2 lately. Our calculations also showed that XELA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a lot of metrics market participants use to evaluate publicly traded companies. A duo of the most underrated metrics are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best money managers can beat the broader indices by a healthy amount (see the details here).
David Einhorn of Greenlight Capital
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 glance at the fresh hedge fund action regarding Exela Technologies, Inc. (NASDAQ:XELA).
How are hedge funds trading Exela Technologies, Inc. (NASDAQ:XELA)?
Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in XELA over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Nantahala Capital Management held the most valuable stake in Exela Technologies, Inc. (NASDAQ:XELA), which was worth $15.1 million at the end of the third quarter. On the second spot was Greenlight Capital which amassed $9.5 million worth of shares. Gates Capital Management, Scoggin, and Avenue 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 Greenlight Capital allocated the biggest weight to Exela Technologies, Inc. (NASDAQ:XELA), around 0.68% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, designating 0.56 percent of its 13F equity portfolio to XELA.
Judging by the fact that Exela Technologies, Inc. (NASDAQ:XELA) has experienced declining sentiment from the smart money, logic holds that there lies a certain “tier” of hedge funds who were dropping their entire stakes last quarter. Interestingly, Israel Englander’s Millennium Management dropped the biggest stake of the 750 funds monitored by Insider Monkey, totaling close to $0.1 million in stock, and Nick Niell’s Arrowgrass Capital Partners was right behind this move, as the fund cut about $0 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Exela Technologies, Inc. (NASDAQ:XELA). These stocks are Safe Bulkers, Inc. (NYSE:SB), Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK), Rockwell Medical Inc (NASDAQ:RMTI), and Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE). This group of stocks’ market valuations match XELA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SB | 7 | 10705 | 2 |
| PEBK | 2 | 16409 | 0 |
| RMTI | 5 | 1021 | -6 |
| ZYNE | 4 | 7852 | 1 |
| Average | 4.5 | 8997 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $33 million in XELA’s case. Safe Bulkers, Inc. (NYSE:SB) is the most popular stock in this table. On the other hand Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) is the least popular one with only 2 bullish hedge fund positions. Exela Technologies, Inc. (NASDAQ:XELA) 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 XELA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on XELA were disappointed as the stock returned -72.6% 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.
