Is Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) ready to rally soon? Prominent investors are betting on the stock. The number of long hedge fund bets went up by 1 recently. Our calculations also showed that lxrx isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the fresh hedge fund action surrounding Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX).
What have hedge funds been doing with Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)?
At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in LXRX a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) was held by Renaissance Technologies, which reported holding $2.7 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $1.7 million position. Other investors bullish on the company included D E Shaw, PDT Partners, and Blue Mountain Capital.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, established the largest position in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX). Blue Mountain Capital had $0.6 million invested in the company at the end of the quarter. David M. Knott’s Dorset Management also initiated a $0.2 million position during the quarter. The following funds were also among the new LXRX investors: Jeffrey Talpins’s Element Capital Management and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s check out hedge fund activity in other stocks similar to Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX). We will take a look at Costamare Inc (NYSE:CMRE), Dorchester Minerals LP (NASDAQ:DMLP), RISE Education Cayman Ltd (NASDAQ:REDU), and Amerant Bancorp Inc. (NASDAQ:AMTB). All of these stocks’ market caps are closest to LXRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMRE | 9 | 16990 | -1 |
| DMLP | 6 | 34031 | 0 |
| REDU | 3 | 5414 | -1 |
| AMTB | 5 | 9540 | 2 |
| Average | 5.75 | 16494 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $9 million in LXRX’s case. Costamare Inc (NYSE:CMRE) is the most popular stock in this table. On the other hand RISE Education Cayman Ltd (NASDAQ:REDU) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on LXRX as the stock returned 12.4% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
