Should You Buy Exelixis, Inc. (EXEL)?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Exelixis, Inc. (NASDAQ:EXEL).

Is Exelixis, Inc. (NASDAQ:EXEL) an excellent investment right now? Overall, it looks like the smart money is turning bullish, as the number of investors from our database bullish on the company went up by 13 to 34 during the third quarter. At the end of this article we will also compare EXEL to other stocks including Northwest Natural Gas Co (NYSE:NWN), Greif, Inc. (NYSE:GEF), and Tetra Tech, Inc. (NASDAQ:TTEK) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to take a look at the new action surrounding Exelixis, Inc. (NASDAQ:EXEL).

Hedge fund activity in Exelixis, Inc. (NASDAQ:EXEL)

At the end of September, a total of 34 investors tracked by Insider Monkey held long positions in Exelixis, up by 62% over the quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the largest position in Exelixis, Inc. (NASDAQ:EXEL), worth close to $79.4 million, corresponding to 0.9% of its total 13F portfolio. On OrbiMed Advisors’s heels is Thomas Steyer’s Farallon Capital holding a $65.2 million position; the fund has 1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of Julian Baker and Felix Baker’s Baker Bros. Advisors, Steve Cohen’s Point72 Asset Management, and David E. Shaw’s D E Shaw.

As aggregate interest increased, key money managers were leading the bulls’ herd. OrbiMed Advisors initiated the most valuable position in Exelixis, Inc. (NASDAQ:EXEL). Peter Muller’s PDT Partners also made a $36 million investment in the stock during the quarter. The other funds with new positions in the stock are Jim Simons’ Renaissance Technologies, Mark Kingdon’s Kingdon Capital, and Kenneth Tropin’s Graham Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Exelixis, Inc. (NASDAQ:EXEL) but similarly valued. We will take a look at Northwest Natural Gas Co (NYSE:NWN), Greif, Inc. (NYSE:GEF), Tetra Tech, Inc. (NASDAQ:TTEK), and Barnes Group Inc. (NYSE:B). This group of stocks’ market valuations resemble EXEL’s market valuation.

As you can see these stocks had an average of 17 funds with long positions and the average amount invested in these stocks was $86 million. That figure was $506 million in EXEL’s case. Greif, Inc. (NYSE:GEF) is the most popular stock in this table. On the other hand Northwest Natural Gas Co (NYSE:NWN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Exelixis, Inc. (NASDAQ:EXEL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.