Were Hedge Funds Right About Xencor Inc (XNCR)?

In this article we will take a look at whether hedge funds think Xencor Inc (NASDAQ:XNCR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Xencor Inc (NASDAQ:XNCR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that XNCR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare XNCR to other stocks including Medifast, Inc. (NYSE:MED), Ameresco Inc (NYSE:AMRC), and Rush Enterprises, Inc. (NASDAQ:RUSHB) to get a better sense of its popularity.

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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Henrik Rhenman of Rhenman & Partners Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 peek at the latest hedge fund action regarding Xencor Inc (NASDAQ:XNCR).

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

At the end of March, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards XNCR over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, EcoR1 Capital held the most valuable stake in Xencor Inc (NASDAQ:XNCR), which was worth $211 million at the end of the fourth quarter. On the second spot was Baker Bros. Advisors which amassed $15.9 million worth of shares. Rhenman & Partners Asset Management, CaaS Capital, and Point72 Asset 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 0 allocated the biggest weight to Xencor Inc (NASDAQ:XNCR), around 9.36% of its 13F portfolio. 0 is also relatively very bullish on the stock, earmarking 0.71 percent of its 13F equity portfolio to XNCR.

Because Xencor Inc (NASDAQ:XNCR) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of fund managers that elected to cut their full holdings in the first quarter. At the top of the heap, Mark Lampert’s Biotechnology Value Fund / BVF Inc dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $55.2 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund sold off about $1.6 million worth. These moves are important to note, as aggregate 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 Xencor Inc (NASDAQ:XNCR). These stocks are Medifast, Inc. (NYSE:MED), Ameresco Inc (NYSE:AMRC), Rush Enterprises, Inc. (NASDAQ:RUSHB), Telephone & Data Systems, Inc. (NYSE:TDS), First Bancorp (NYSE:FBP), Academy Sports and Outdoors, Inc. (NASDAQ:ASO), and Telos Corporation (NASDAQ:TLS). All of these stocks’ market caps resemble XNCR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MED 22 287110 4
AMRC 16 77274 1
RUSHB 4 54912 1
TDS 20 253689 -4
FBP 25 294812 2
ASO 37 409605 11
TLS 15 151370 -13
Average 19.9 218396 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $270 million in XNCR’s case. Academy Sports and Outdoors, Inc. (NASDAQ:ASO) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 4 bullish hedge fund positions. Xencor Inc (NASDAQ:XNCR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XNCR is 43.2. 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately XNCR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); XNCR investors were disappointed as the stock returned -26% since the end of March (through 7/23) 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.

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