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Did Hedge Funds Make The Right Call On Intersect ENT Inc (XENT) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Intersect ENT Inc (NASDAQ:XENT) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Intersect ENT Inc (NASDAQ:XENT) has experienced a decrease in hedge fund interest of late. Our calculations also showed that XENT 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.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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. Now we’re going to analyze the new hedge fund action regarding Intersect ENT Inc (NASDAQ:XENT).

What does smart money think about Intersect ENT Inc (NASDAQ:XENT)?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in XENT over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, James E. Flynn’s Deerfield Management has the largest position in Intersect ENT Inc (NASDAQ:XENT), worth close to $32.7 million, comprising 1% of its total 13F portfolio. Sitting at the No. 2 spot is Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, which holds a $11.4 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish include Efrem Kamen’s Pura Vida Investments, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to Intersect ENT Inc (NASDAQ:XENT), around 2.06% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, dishing out 1.04 percent of its 13F equity portfolio to XENT.

Because Intersect ENT Inc (NASDAQ:XENT) has witnessed declining sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds who sold off their entire stakes heading into Q4. At the top of the heap, Arthur B Cohen and Joseph Healey’s Healthcor Management LP dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $63.2 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $39 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Intersect ENT Inc (NASDAQ:XENT). We will take a look at The Hackett Group, Inc. (NASDAQ:HCKT), AnaptysBio, Inc. (NASDAQ:ANAB), The Marcus Corporation (NYSE:MCS), and Par Pacific Holdings, Inc. (NYSE:PARR). This group of stocks’ market values resemble XENT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HCKT 18 87972 2
ANAB 25 231710 -2
MCS 14 19830 -1
PARR 18 48678 0
Average 18.75 97048 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $77 million in XENT’s case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand The Marcus Corporation (NYSE:MCS) is the least popular one with only 14 bullish hedge fund positions. Intersect ENT Inc (NASDAQ:XENT) 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 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on XENT as the stock returned 45.7% since Q1 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.