Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index ETFs returned approximately 27.5% through the end of November (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Exelixis, Inc. (NASDAQ:EXEL).
Exelixis, Inc. (NASDAQ:EXEL) investors should be aware of an increase in support from the world’s most elite money managers in recent months. EXEL was in 27 hedge funds’ portfolios at the end of September. There were 21 hedge funds in our database with EXEL holdings at the end of the previous quarter. Our calculations also showed that EXEL 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.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Samuel Isaly of OrbiMed Advisors
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the new hedge fund action regarding Exelixis, Inc. (NASDAQ:EXEL).
How have hedgies been trading Exelixis, Inc. (NASDAQ:EXEL)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EXEL over the last 17 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the most valuable position in Exelixis, Inc. (NASDAQ:EXEL), worth close to $262.6 million, corresponding to 0.2% of its total 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $219 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Samuel Isaly’s OrbiMed Advisors, and Farallon Capital. In terms of the portfolio weights assigned to each position OrbiMed Advisors allocated the biggest weight to Exelixis, Inc. (NASDAQ:EXEL), around 1.31% of its portfolio. Portolan Capital Management is also relatively very bullish on the stock, setting aside 0.91 percent of its 13F equity portfolio to EXEL.
As one would reasonably expect, key money managers have jumped into Exelixis, Inc. (NASDAQ:EXEL) headfirst. Great Point Partners, managed by Jeffrey Jay and David Kroin, established the most outsized position in Exelixis, Inc. (NASDAQ:EXEL). Great Point Partners had $5.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $2 million position during the quarter. The other funds with brand new EXEL positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, and Lee Ainslie’s Maverick Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Exelixis, Inc. (NASDAQ:EXEL). We will take a look at Planet Fitness Inc (NYSE:PLNT), Gerdau SA (NYSE:GGB), Huntsman Corporation (NYSE:HUN), and SmileDirectClub, Inc. (NASDAQ:SDC). This group of stocks’ market caps match EXEL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLNT | 34 | 525492 | -4 |
| GGB | 9 | 95401 | 2 |
| HUN | 28 | 394601 | -2 |
| SDC | 28 | 287514 | 28 |
| Average | 24.75 | 325752 | 6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $682 million in EXEL’s case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 9 bullish hedge fund positions. Exelixis, Inc. (NASDAQ:EXEL) 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 EXEL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EXEL were disappointed as the stock returned -5.9% 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.
