Shares of EXACT Sciences Corporation (NASDAQ:EXAS) and F5 Networks, Inc. (NASDAQ:FFIV) are down after each company received bad news. Exact Sciences is down more than 41% after the U.S. Preventive Services Task Force issued an unfavorable draft guideline over the company’s Cologuard product while F5 Networks is down 5% after Citigroup rated the stock a ‘Sell’. Let’s take a closer look at the two downside catalysts and see how hedge funds are positioned in the two falling stocks.
In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8000 funds in operation at present, Hedge fund experts at Insider Monkey look at the aristocrats of this group, around 730 funds. Contrary to popular belief Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge. Hedge funds managed to outperform the market on the long side of their portfolio. In fact, the 15 most popular small-cap stocks among hedge funds returned 118% since the end of August 2012 and beat the S&P 500 Index by 60 percentage points (see more details here).
EXACT Sciences Corporation (NASDAQ:EXAS) shares sold off because the U.S. Preventive Services Task Force (USPSTF) included this in its draft guidelines:
“Screening with computed tomography (CT) colonography and multitargeted stool DNA (FIT-DNA) testing may be useful in select clinical circumstances. However, there is less mature evidence to support these methods, resulting in greater uncertainty about their net benefits and the most appropriate situations in which to use them.”
EXACT Sciences’ Cologuard is a non-invasive multi-targeted stool DNA test that helps detect the presence of colorectal cancer and pre-cancer. If USPSTF’s guidelines are finalized, demand for Cologuard will decline and EXACT Sciences’ revenue and profits will come in below expectations. The company isn’t standing still, however, as it plans to work “with USPSTF through its public comment process to optimize Cologuard’s position in the guidelines”. If EXACT Sciences can get USPSTF to reverse its position, its stock will bounce back, although judging by the severity of the sell off, investors don’t think it very likely.
According to our data, hedge funds were divided on EXACT Sciences Corporation (NASDAQ:EXAS). Hedge funds owned 9.00% of the company at the end of the second quarter, but likely made up a considerable percentage of the 27.44% of the float that is short. A total of 17 funds reported stakes worth $237.17 million in aggregate in the latest round of 13F filings, up from 16 funds and $162.3 million a quarter earlier. Samuel Isaly‘s Orbimed Advisors kept its position unchanged at 1.78 million shares, while Roberto Mignone’s Bridger Management established a new stake of 1.54 million shares. Drew Cupps’ Cupps Capital Management decreased its holding by 18% to 1.04 million shares.
Analysts at Citi rated F5 Networks, Inc. (NASDAQ:FFIV) a ‘Sell’ with a $105 price target on Tuesday, citing lower predicted demand for the company’s products. The analysts don’t think F5 will earn the consensus earnings estimate of $7.33 per share next year, and believe F5 will lower its guidance over the next two quarters. F5 shares are down 10% year to date after experiencing slower cyclical and secular growth for its products.