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Did Hedge Funds Make The Right Call On XACT Sciences Corporation (EXAS) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded EXACT Sciences Corporation (NASDAQ:EXAS) and determine whether the smart money was really smart about this stock.

EXACT Sciences Corporation (NASDAQ:EXAS) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. Our calculations also showed that EXAS 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.

At the moment there are a lot of metrics investors have at their disposal to assess their stock investments. Two of the less known metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top money managers can trounce the broader indices by a very impressive amount (see the details here).

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the recent hedge fund action encompassing EXACT Sciences Corporation (NASDAQ:EXAS).

How have hedgies been trading EXACT Sciences Corporation (NASDAQ:EXAS)?

Heading into the second quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EXAS over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is EXAS A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Andreas Halvorsen’s Viking Global has the largest position in EXACT Sciences Corporation (NASDAQ:EXAS), worth close to $140.8 million, comprising 0.7% of its total 13F portfolio. On Viking Global’s heels is Julian Baker and Felix Baker of Baker Bros. Advisors, with a $107.1 million position; 0.7% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Nancy Zevenbergen’s Zevenbergen Capital Investments, Scott Ferguson’s Sachem Head Capital and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Zevenbergen Capital Investments allocated the biggest weight to EXACT Sciences Corporation (NASDAQ:EXAS), around 3.92% of its 13F portfolio. RiverPark Advisors is also relatively very bullish on the stock, setting aside 2.91 percent of its 13F equity portfolio to EXAS.

Due to the fact that EXACT Sciences Corporation (NASDAQ:EXAS) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that elected to cut their full holdings by the end of the first quarter. At the top of the heap, Mitchell Blutt’s Consonance Capital Management cut the largest investment of all the hedgies monitored by Insider Monkey, comprising about $53.6 million in stock, and Daniel Sundheim’s D1 Capital Partners was right behind this move, as the fund said goodbye to about $25.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as EXACT Sciences Corporation (NASDAQ:EXAS) but similarly valued. We will take a look at Allegion plc (NYSE:ALLE), Pinnacle West Capital Corporation (NYSE:PNW), Cheniere Energy, Inc. (NYSE:LNG), and Molina Healthcare, Inc. (NYSE:MOH). This group of stocks’ market valuations are closest to EXAS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALLE 31 404344 6
PNW 25 923395 0
LNG 39 1880676 -4
MOH 32 1223084 -3
Average 31.75 1107875 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $1108 million. That figure was $514 million in EXAS’s case. Cheniere Energy, Inc. (NYSE:LNG) is the most popular stock in this table. On the other hand Pinnacle West Capital Corporation (NYSE:PNW) is the least popular one with only 25 bullish hedge fund positions. EXACT Sciences Corporation (NASDAQ:EXAS) 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 EXAS as the stock returned 49.9% 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.