In this article we will analyze whether Intersect ENT Inc (NASDAQ:XENT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is XENT a good stock to buy now? Hedge fund interest in Intersect ENT Inc (NASDAQ:XENT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that XENT 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Marine Products Corp. (NYSE:MPX), SurModics, Inc. (NASDAQ:SRDX), and Washington Trust Bancorp, Inc. (NASDAQ:WASH) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Now we’re going to analyze the recent hedge fund action encompassing Intersect ENT Inc (NASDAQ:XENT).
Do Hedge Funds Think XENT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 22 hedge funds with a bullish position in XENT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Deerfield Management was the largest shareholder of Intersect ENT Inc (NASDAQ:XENT), with a stake worth $25.7 million reported as of the end of September. Trailing Deerfield Management was Citadel Investment Group, which amassed a stake valued at $18.7 million. Pura Vida Investments, Great Point Partners, and Rock Springs Capital Management 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 Great Point Partners allocated the biggest weight to Intersect ENT Inc (NASDAQ:XENT), around 1.1% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, setting aside 0.72 percent of its 13F equity portfolio to XENT.
Since Intersect ENT Inc (NASDAQ:XENT) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds that slashed their positions entirely heading into Q4. Interestingly, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors said goodbye to the biggest position of the 750 funds followed by Insider Monkey, valued at an estimated $1.4 million in stock, and Jinghua Yan’s TwinBeech Capital was right behind this move, as the fund dropped about $0.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Intersect ENT Inc (NASDAQ:XENT). We will take a look at Marine Products Corp. (NYSE:MPX), SurModics, Inc. (NASDAQ:SRDX), Washington Trust Bancorp, Inc. (NASDAQ:WASH), Scholar Rock Holding Corporation (NASDAQ:SRRK), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), Hycroft Mining Holding Corporation (NASDAQ:HYMC), and Radius Health Inc (NASDAQ:RDUS). This group of stocks’ market values are closest to XENT’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 13.4 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $109 million in XENT’s case. Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is the most popular stock in this table. On the other hand Scholar Rock Holding Corporation (NASDAQ:SRRK) is the least popular one with only 4 bullish hedge fund positions. Intersect ENT Inc (NASDAQ:XENT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XENT is 62.4. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on XENT as the stock returned 33.4% since the end of Q3 (through 12/14) 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.