Were Expert Investors Right About EXACT Sciences Corporation (EXAS)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards EXACT Sciences Corporation (NASDAQ:EXAS) and determine whether hedge funds skillfully traded this stock.

EXACT Sciences Corporation (NASDAQ:EXAS) investors should be aware of an increase in hedge fund interest in recent months. EXACT Sciences Corporation (NASDAQ:EXAS) was in 40 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. There were 35 hedge funds in our database with EXAS holdings at the end of June. Our calculations also showed that EXAS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to check out the recent hedge fund action regarding EXACT Sciences Corporation (NASDAQ:EXAS).

Alex Litowitz Magnetar Capital

Alec Litowitz of Magnetar Capital

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

At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the second quarter of 2021. By comparison, 34 hedge funds held shares or bullish call options in EXAS 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.

Among these funds, ARK Investment Management held the most valuable stake in EXACT Sciences Corporation (NASDAQ:EXAS), which was worth $1119.5 million at the end of the third quarter. On the second spot was Casdin Capital which amassed $225.3 million worth of shares. Zevenbergen Capital Investments, Eminence Capital, and Farallon Capital 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 Casdin Capital allocated the biggest weight to EXACT Sciences Corporation (NASDAQ:EXAS), around 5.61% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, setting aside 4.2 percent of its 13F equity portfolio to EXAS.

As industrywide interest jumped, some big names were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the largest position in EXACT Sciences Corporation (NASDAQ:EXAS). LMR Partners had $9.9 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new EXAS investors: Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and Peter Muller’s PDT Partners.

Let’s now take a look at hedge fund activity in other stocks similar to EXACT Sciences Corporation (NASDAQ:EXAS). We will take a look at Markel Corporation (NYSE:MKL), Viatris Inc. (NASDAQ:VTRS), Westinghouse Air Brake Technologies Corporation (NYSE:WAB), Conagra Brands, Inc. (NYSE:CAG), Coupa Software Incorporated (NASDAQ:COUP), GoodRx Holdings, Inc. (NASDAQ:GDRX), and 10x Genomics, Inc. (NASDAQ:TXG). This group of stocks’ market valuations are similar to EXAS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MKL 25 689937 -8
VTRS 55 1466403 2
WAB 38 2982164 -8
CAG 20 625323 -9
COUP 52 4542300 -2
GDRX 26 1063016 -2
TXG 28 963031 0
Average 34.9 1761739 -3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.9 hedge funds with bullish positions and the average amount invested in these stocks was $1762 million. That figure was $1984 million in EXAS’s case. Viatris Inc. (NASDAQ:VTRS) is the most popular stock in this table. On the other hand Conagra Brands, Inc. (NYSE:CAG) is the least popular one with only 20 bullish hedge fund positions. EXACT Sciences Corporation (NASDAQ:EXAS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EXAS is 66.5. 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. This is a slightly positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, EXAS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EXAS were disappointed as the stock returned -20% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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