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Did Hedge Funds Make The Right Call On Exelixis, Inc. (EXEL) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Exelixis, Inc. (NASDAQ:EXEL) and determine whether hedge funds skillfully traded this stock.

Exelixis, Inc. (NASDAQ:EXEL) has seen an increase in hedge fund interest lately. EXEL was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with EXEL positions 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 Q1 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.

In the 21st century investor’s toolkit there are tons of gauges stock market investors employ to value stocks. A duo of the most useful gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a superb amount (see the details here).

Peter Kolchinsky of RA Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s view the new hedge fund action regarding Exelixis, Inc. (NASDAQ:EXEL).

What have hedge funds been doing with Exelixis, Inc. (NASDAQ:EXEL)?

At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in EXEL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Exelixis, Inc. (NASDAQ:EXEL), with a stake worth $345.6 million reported as of the end of September. Trailing Renaissance Technologies was Farallon Capital, which amassed a stake valued at $172.2 million. AQR Capital Management, RA Capital Management, and OrbiMed Advisors 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 RA Capital Management allocated the biggest weight to Exelixis, Inc. (NASDAQ:EXEL), around 2.46% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, dishing out 2.34 percent of its 13F equity portfolio to EXEL.

As industrywide interest jumped, key money managers have jumped into Exelixis, Inc. (NASDAQ:EXEL) headfirst. RA Capital Management, managed by Peter Kolchinsky, initiated the most valuable position in Exelixis, Inc. (NASDAQ:EXEL). RA Capital Management had $77.9 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $18.2 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, and Bhagwan Jay Rao’s Integral Health Asset Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Exelixis, Inc. (NASDAQ:EXEL) but similarly valued. These stocks are Apartment Investment and Management Co. (NYSE:AIV), Jones Lang LaSalle Inc (NYSE:JLL), American Airlines Group Inc (NASDAQ:AAL), and CubeSmart (NYSE:CUBE). This group of stocks’ market values are closest to EXEL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AIV 21 395202 -3
JLL 26 660081 -4
AAL 36 681734 -5
CUBE 18 185612 -9
Average 25.25 480657 -5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $481 million. That figure was $935 million in EXEL’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand CubeSmart (NYSE:CUBE) is the least popular one with only 18 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on EXEL as the stock returned 37.9% in Q2 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.