Is XERS A Good Stock To Buy Now?

In this article you are going to find out whether hedge funds think Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is XERS a good stock to buy now? Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 20. There were 20 hedge funds in our database with XERS positions at the end of the second quarter. Our calculations also showed that XERS 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Petry Sessa Capital

John Petry of Sessa Capital

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. With all of this in mind let’s view the fresh hedge fund action encompassing Xeris Pharmaceuticals, Inc. (NASDAQ:XERS).

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

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -35% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in XERS a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Sessa Capital, managed by John Petry, holds the most valuable position in Xeris Pharmaceuticals, Inc. (NASDAQ:XERS). Sessa Capital has a $24.7 million position in the stock, comprising 2% of its 13F portfolio. Sitting at the No. 2 spot is Redmile Group, managed by Jeremy Green, which holds a $14.2 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include D. E. Shaw’s D E Shaw, and Ari Zweiman’s 683 Capital Partners. In terms of the portfolio weights assigned to each position Sessa Capital allocated the biggest weight to Xeris Pharmaceuticals, Inc. (NASDAQ:XERS), around 2.02% of its 13F portfolio. Kamunting Street Capital is also relatively very bullish on the stock, dishing out 1.28 percent of its 13F equity portfolio to XERS.

Seeing as Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) has experienced a decline in interest from hedge fund managers, it’s safe to say that there is a sect of funds who sold off their entire stakes last quarter. At the top of the heap, James E. Flynn’s Deerfield Management dumped the largest stake of the 750 funds watched by Insider Monkey, totaling an estimated $8.5 million in stock, and Steve Zheng’s Deepcurrents Investment Group was right behind this move, as the fund sold off about $6.1 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Xeris Pharmaceuticals, Inc. (NASDAQ:XERS). These stocks are Guaranty Bancshares, Inc. (NASDAQ:GNTY), Anavex Life Sciences Corp. (NASDAQ:AVXL), Bridgewater Bancshares, Inc. (NASDAQ:BWB), Yiren Digital Ltd. (NYSE:YRD), Preferred Apartment Communities Inc. (NYSE:APTS), Hess Midstream LP (NYSE:HESM), and IBEX Limited (NASDAQ:IBEX). This group of stocks’ market values match XERS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNTY 2 3343 0
AVXL 3 3308 -2
BWB 6 19703 -3
YRD 2 1534 1
APTS 10 5633 0
HESM 5 7511 -1
IBEX 5 19776 5
Average 4.7 8687 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.7 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $49 million in XERS’s case. Preferred Apartment Communities Inc. (NYSE:APTS) is the most popular stock in this table. On the other hand Guaranty Bancshares, Inc. (NASDAQ:GNTY) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) is more popular among hedge funds. Our overall hedge fund sentiment score for XERS is 67.5. 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. Unfortunately XERS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on XERS were disappointed as the stock returned -30.9% since the end of the third quarter (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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