Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Exantas Capital Corp. (NYSE:XAN).
Is XAN a good stock to buy now? Exantas Capital Corp. (NYSE:XAN) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. Exantas Capital Corp. (NYSE:XAN) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 17. Our calculations also showed that XAN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover 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 and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s view the recent hedge fund action surrounding Exantas Capital Corp. (NYSE:XAN).
Do Hedge Funds Think XAN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards XAN over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Exantas Capital Corp. (NYSE:XAN) was held by D E Shaw, which reported holding $1.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $1 million position. Other investors bullish on the company included Two Sigma Advisors, Millennium Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Exantas Capital Corp. (NYSE:XAN), around 0.01% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.0048 percent of its 13F equity portfolio to XAN.
Judging by the fact that Exantas Capital Corp. (NYSE:XAN) has experienced bearish sentiment from the smart money, it’s easy to see that there lies a certain “tier” of hedge funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, J. Alan Reid, Jr.’s Forward Management dropped the biggest position of all the hedgies tracked by Insider Monkey, totaling about $2.1 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Exantas Capital Corp. (NYSE:XAN). We will take a look at Clearsign Technologies Corp (NASDAQ:CLIR), Novan, Inc. (NASDAQ:NOVN), Navios Maritime Partners L.P. (NYSE:NMM), Perceptron, Inc. (NASDAQ:PRCP), Nephros, Inc. (NASDAQ:NEPH), Cyren Ltd (NASDAQ:CYRN), and ConforMIS, Inc. (NASDAQ:CFMS). This group of stocks’ market values resemble XAN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLIR | 1 | 183 | -1 |
| NOVN | 2 | 75 | 0 |
| NMM | 1 | 320 | -1 |
| PRCP | 11 | 16030 | 5 |
| NEPH | 4 | 26727 | -1 |
| CYRN | 3 | 3226 | -1 |
| CFMS | 7 | 14796 | -3 |
| Average | 4.1 | 8765 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.1 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $4 million in XAN’s case. Perceptron, Inc. (NASDAQ:PRCP) is the most popular stock in this table. On the other hand Clearsign Technologies Corp (NASDAQ:CLIR) is the least popular one with only 1 bullish hedge fund positions. Exantas Capital Corp. (NYSE:XAN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XAN is 56.9. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on XAN as the stock returned 94.7% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
