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EXACT Sciences (EXAS) Has Fallen 28% in Last One Year, Underperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of RiverPark Advisors top stock picks. RiverPark Advisors, an investment management firm, is bullish on Exact Sciences Corp (NASDAQ:EXAS) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Exact Sciences Corp (NASDAQ:EXAS) stock. Exact Sciences Corp (NASDAQ:EXAS) is a molecular diagnostics company with an initial focus on the early detection and prevention of colorectal cancer.

In July 2019, RiverPark Advisors had released its Q2 2019 investor letter. The investment firm said that Exact Sciences Corp (NASDAQ:EXAS) stock was one of the top contributors to the Large Growth fund’s performance in Q2 2019. Exact Sciences Corp (NASDAQ:EXAS) stock has posted a return of -27.5% in the trailing one year period, underperforming the S&P 500 Index which returned 8.3% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, Exact Sciences Corp (NASDAQ:EXAS) stock has fallen by 18.6%.

In Q2 2019 investor letter, RiverPark Advisors said the Large Growth fund posted a return of 7.4% in the second quarter of 2019, outperforming fund’s benchmark the S&P 500 Index which returned 4.3% in the same period. Let’s take a look at comments made by RiverPark Advisors about Exact Sciences Corp (NASDAQ:EXAS) stock in the Q2 2019 investor letter.

“Exact Sciences: After gaining 37% for the first quarter as the company reported strong fourth quarter results and provided 2019 guidance for Cologuard test unit growth of 60%, EXAS shares gained another 36% for the second quarter fueled by strong first quarter results and increased guidance to 64% test unit growth for the year.

For the first quarter, the company delivered 334,000 Cologuard tests, representing 79% yearover-year growth (up from only 4,000 tests in first quarter 2015), a significant acceleration from the fourth quarter’s 66% growth and third quarter’s 50% growth and evidence of the power of the company’s recent marketing support deal with Pfizer. The company also recently announced higher compliance and completion rates, as well as extremely positive data on its new pancreatic cancer detection test.

The company’s quarterly results reinforce our thesis that the Pfizer deal, which, among other benefits, adds 1,000 Pfizer field sales representatives to EXAS’s 500 sales reps, will materially accelerate the adoption of Cologuard as a standard of care in the $15 billion colon cancer screening test market (colorectal cancer is the second leading cause of cancer deaths in the US). As Cologuard increasingly becomes the standard of care (it was FDA-approved and covered by Medicare and Medicaid in 2014 and has been added to several colon screening guidelines), health insurers increase coverage (the top five payers now have in-network contracts covering 80 million potential patients, and as a result 94% of Cologuard patients have no out of pocket cost), and the new Pfizer partnership bears fruit, we believe that EXAS’s revenue growth should grow at a greater than 40% revenue CAGR over the next few years. Management also recently disclosed that, excluding R&D for pipeline products, the company is approximately cash flow break-even, implying that as Cologuard volumes accelerate (as they did for the quarter), the company should generate a steep ramp in cash flow.

In addition, we anticipate several other revenue catalysts including improving compliance rates (patients that receive a test and properly complete it), the roll out of Cologuard 2.0 (a more effective test), the 2021 $250 million re-screen opportunity (patients tested in 2018 that need to be retested in three years), and the potential label expansion in 2020 to test the 45-49 year-old population (which alone would add approximately $4 billion to Cologuard’s current $15 billion available market). As the business scales, we project at least 80% gross margins (up from 74% in 2018), and a greater-than 40% operating margin (from negative today). We maintained our position in EXAS and it remains a core holding in the Fund.”

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In Q2 2020, the number of bullish hedge fund positions on Exact Sciences Corp (NASDAQ:EXAS) stock increased by about 26% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with EXAS’s growth potential. Our calculations showed that Exact Sciences Corp (NASDAQ:EXAS) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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