The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Intersect ENT Inc (NASDAQ:XENT), and what that likely means for the prospects of the company and its stock.
Is Intersect ENT Inc (NASDAQ:XENT) undervalued? The best stock pickers are taking a bullish view. The number of bullish hedge fund positions advanced by 5 recently. Our calculations also showed that XENT 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.
Why do we pay any attention at all to hedge fund sentiment? 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.
Phill Gross of Adage Capital Management
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. We’re going to go over the recent hedge fund action regarding Intersect ENT Inc (NASDAQ:XENT).
What have hedge funds been doing with Intersect ENT Inc (NASDAQ:XENT)?
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards XENT over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Deerfield Management was the largest shareholder of Intersect ENT Inc (NASDAQ:XENT), with a stake worth $52.9 million reported as of the end of September. Trailing Deerfield Management was Healthcor Management, which amassed a stake valued at $43.2 million. Point72 Asset Management, Adage Capital Management, and Rock Springs Capital 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 Pura Vida Investments allocated the biggest weight to Intersect ENT Inc (NASDAQ:XENT), around 3.99% of its 13F portfolio. Broadfin Capital is also relatively very bullish on the stock, setting aside 2.45 percent of its 13F equity portfolio to XENT.
As industrywide interest jumped, specific money managers have jumped into Intersect ENT Inc (NASDAQ:XENT) headfirst. Broadfin Capital, managed by Kevin Kotler, initiated the largest position in Intersect ENT Inc (NASDAQ:XENT). Broadfin Capital had $13.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.4 million position during the quarter. The following funds were also among the new XENT investors: Dmitry Balyasny’s Balyasny Asset Management, Minhua Zhang’s Weld Capital Management, and David Harding’s Winton Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Intersect ENT Inc (NASDAQ:XENT). These stocks are First Financial Corporation (NASDAQ:THFF), People’s Utah Bancorp (NASDAQ:PUB), Gannett Co., Inc. (NYSE:NEWM), and TG Therapeutics Inc (NASDAQ:TGTX). This group of stocks’ market valuations are closest to XENT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THFF | 8 | 14815 | -1 |
| PUB | 6 | 16721 | 3 |
| NEWM | 19 | 164290 | 5 |
| TGTX | 18 | 114737 | 1 |
| Average | 12.75 | 77641 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $209 million in XENT’s case. Gannett Co., Inc. (NYSE:NEWM) is the most popular stock in this table. On the other hand PPeople’s Utah Bancorp (NASDAQ:PUB) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Intersect ENT Inc (NASDAQ:XENT) 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 XENT as the stock returned 27.5% 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.
