Is XOMA Corp (XOMA) A Good Stock To Buy?

In this article we will check out the progression of hedge fund sentiment towards XOMA Corp (NASDAQ:XOMA) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is XOMA a good stock to buy? XOMA Corp (NASDAQ:XOMA) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 12. XOMA has experienced a decrease in hedge fund sentiment of late. There were 10 hedge funds in our database with XOMA holdings at the end of December. Our calculations also showed that XOMA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

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 $23 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 we’re going to take a look at the new hedge fund action regarding XOMA Corp (NASDAQ:XOMA).

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

At first quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in XOMA 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 XOMA Corp (NASDAQ:XOMA) was held by Biotechnology Value Fund / BVF Inc, which reported holding $144.1 million worth of stock at the end of December. It was followed by Opaleye Management with a $17.9 million position. Other investors bullish on the company included Stonepine Capital, Millennium Management, and Athanor Capital. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to XOMA Corp (NASDAQ:XOMA), around 5.4% of its 13F portfolio. 0 is also relatively very bullish on the stock, designating 3.6 percent of its 13F equity portfolio to XOMA.

Judging by the fact that XOMA Corp (NASDAQ:XOMA) has witnessed bearish sentiment from the smart money, it’s easy to see that there exists a select few money managers that slashed their positions entirely by the end of the first quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest stake of all the hedgies watched by Insider Monkey, comprising an estimated $0.7 million in stock, and J. Carlo Cannell’s Cannell Capital was right behind this move, as the fund sold off about $0.5 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as XOMA Corp (NASDAQ:XOMA) but similarly valued. These stocks are Yunji Inc. (NASDAQ:YJ), Seneca Foods Corp. (NASDAQ:SENEB), VOXX International Corp (NASDAQ:VOXX), Bridgewater Bancshares, Inc. (NASDAQ:BWB), Arcimoto, Inc. (NASDAQ:FUV), DURECT Corporation (NASDAQ:DRRX), and Yellow Corporation (NASDAQ:YELL). This group of stocks’ market valuations are similar to XOMA’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $170 million in XOMA’s case. Yellow Corporation (NASDAQ:YELL) is the most popular stock in this table. On the other hand Seneca Foods Corp. (NASDAQ:SENEB) is the least popular one with only 2 bullish hedge fund positions. XOMA Corp (NASDAQ:XOMA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XOMA is 21.9. 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. 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 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately XOMA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); XOMA investors were disappointed as the stock returned -25.5% since the end of March (through 6/18) 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.

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