Is XBiotech Inc. (XBIT) Going to Burn These Hedge Funds?

In this article we will take a look at whether hedge funds think XBiotech Inc. (NASDAQ:XBIT) is 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, unconventional data sources, 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.

XBiotech Inc. (NASDAQ:XBIT) has experienced an increase in hedge fund interest recently. XBiotech Inc. (NASDAQ:XBIT) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic is 8. Our calculations also showed that XBIT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you’d ask most investors, hedge funds are viewed as worthless, outdated financial tools of the past. While there are greater than 8000 funds trading at the moment, Our experts choose to focus on the top tier of this group, about 850 funds. These investment experts command the lion’s share of the hedge fund industry’s total capital, and by tracking their finest equity investments, Insider Monkey has come up with several investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s go over the key hedge fund action encompassing XBiotech Inc. (NASDAQ:XBIT).

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

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in XBIT over the last 23 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

More specifically, CaaS Capital was the largest shareholder of XBiotech Inc. (NASDAQ:XBIT), with a stake worth $1 million reported as of the end of March. Trailing CaaS Capital was AQR Capital Management, which amassed a stake valued at $1 million. D E Shaw, ExodusPoint Capital, and Caxton Associates LP were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to XBiotech Inc. (NASDAQ:XBIT), around 0.02% of its 13F portfolio. 0 is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to XBIT.

As one would reasonably expect, key hedge funds have been driving this bullishness. D E Shaw, managed by D. E. Shaw, assembled the most valuable position in XBiotech Inc. (NASDAQ:XBIT). D E Shaw had $0.3 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.2 million position during the quarter. The following funds were also among the new XBIT investors: Bruce Kovner’s Caxton Associates LP and Israel Englander’s Millennium Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as XBiotech Inc. (NASDAQ:XBIT) but similarly valued. These stocks are Arlo Technologies, Inc. (NYSE:ARLO), The First of Long Island Corporation (NASDAQ:FLIC), Boqii Holding Limited (NYSE:BQ), REX American Resources Corp (NYSE:REX), MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), and AerSale Corporation (NASDAQ:ASLE). This group of stocks’ market values are similar to XBIT’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $3 million in XBIT’s case. Arlo Technologies, Inc. (NYSE:ARLO) is the most popular stock in this table. On the other hand Boqii Holding Limited (NYSE:BQ) is the least popular one with only 2 bullish hedge fund positions. XBiotech Inc. (NASDAQ:XBIT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XBIT is 43. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately XBIT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); XBIT investors were disappointed as the stock returned -0.2% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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