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2019 Review: Top Hedge Fund Stocks vs. Exelixis, Inc. (EXEL)

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Exelixis, Inc. (NASDAQ:EXEL) and see how the stock performed in comparison to hedge funds’ consensus picks.

Exelixis, Inc. (NASDAQ:EXEL) shareholders have witnessed an increase in enthusiasm from smart money in recent months. 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 at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Samuel Isaly Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Exelixis, Inc. (NASDAQ:EXEL).

How have hedgies been trading Exelixis, Inc. (NASDAQ:EXEL)?

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in EXEL a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in Exelixis, Inc. (NASDAQ:EXEL), worth close to $262.6 million, accounting for 0.2% of its total 13F portfolio. On Renaissance Technologies’s heels is Cliff Asness of AQR Capital Management, with a $219 million position; 0.3% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism consist of 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 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, dishing out 0.91 percent of its 13F equity portfolio to EXEL.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Great Point Partners, managed by Jeffrey Jay and David Kroin, established the most valuable 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 made a $2 million investment in the stock during the quarter. The following funds were also among the new EXEL investors: 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 go over hedge fund activity in other stocks – not necessarily in the same industry as Exelixis, Inc. (NASDAQ:EXEL) but similarly valued. These stocks are Planet Fitness Inc (NYSE:PLNT), Gerdau SA (NYSE:GGB), Huntsman Corporation (NYSE:HUN), and SmileDirectClub, Inc. (NASDAQ:SDC). This group of stocks’ market valuations are similar to EXEL’s market valuation.

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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 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 -10.4% in 2019 and trailed 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.

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