Is NXTC A Good Stock To Buy Now?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is NextCure, Inc. (NASDAQ:NXTC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is NXTC a good stock to buy now? NextCure, Inc. (NASDAQ:NXTC) has seen a decrease in activity from the world’s largest hedge funds of late. NextCure, Inc. (NASDAQ:NXTC) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. Our calculations also showed that NXTC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding NextCure, Inc. (NASDAQ:NXTC).

Do Hedge Funds Think NXTC Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in NXTC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in NextCure, Inc. (NASDAQ:NXTC) was held by OrbiMed Advisors, which reported holding $23.9 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $9.5 million position. Other investors bullish on the company included Hillhouse Capital Management, Millennium Management, and Ghost Tree Capital. In terms of the portfolio weights assigned to each position Ghost Tree Capital allocated the biggest weight to NextCure, Inc. (NASDAQ:NXTC), around 1.02% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, designating 0.3 percent of its 13F equity portfolio to NXTC.

Because NextCure, Inc. (NASDAQ:NXTC) has experienced bearish sentiment from the smart money, logic holds that there is a sect of funds that elected to cut their full holdings heading into Q4. At the top of the heap, Jeffrey Jay and David Kroin’s Great Point Partners said goodbye to the largest stake of the 750 funds followed by Insider Monkey, comprising about $21.4 million in stock, and Bihua Chen’s Cormorant Asset Management was right behind this move, as the fund dropped about $14.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as NextCure, Inc. (NASDAQ:NXTC) but similarly valued. These stocks are Fidus Investment Corp (NASDAQ:FDUS), ProQR Therapeutics NV (NASDAQ:PRQR), The Marcus Corporation (NYSE:MCS), Greenlight Capital Re, Ltd. (NASDAQ:GLRE), Preformed Line Products Company (NASDAQ:PLPC), Sierra Metals Inc. (NYSE:SMTS), and Gold Resource Corporation (NYSE:GORO). All of these stocks’ market caps are similar to NXTC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FDUS 5 6368 1
PRQR 5 39417 -2
MCS 13 14607 0
GLRE 4 1004 -2
PLPC 5 20457 -2
SMTS 3 1279 1
GORO 4 1738 -3
Average 5.6 12124 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $55 million in NXTC’s case. The Marcus Corporation (NYSE:MCS) is the most popular stock in this table. On the other hand Sierra Metals Inc. (NYSE:SMTS) is the least popular one with only 3 bullish hedge fund positions. NextCure, Inc. (NASDAQ:NXTC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NXTC is 74.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on NXTC as the stock returned 25.7% since the end of Q3 (through 12/8) 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.