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Should I Buy Exelixis, Inc. (EXEL)?

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·5 min read
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At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Exelixis, Inc. (NASDAQ:EXEL) makes for a good investment right now.

Is Exelixis, Inc. (NASDAQ:EXEL) a safe investment now? Hedge funds were getting more bullish. The number of long hedge fund bets rose by 6 recently. Exelixis, Inc. (NASDAQ:EXEL) was in 33 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 39. Our calculations also showed that EXEL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 27 hedge funds in our database with EXEL holdings at the end of March.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Tim Woolley of Polar Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 new hedge fund action regarding Exelixis, Inc. (NASDAQ:EXEL).

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

At Q2's end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the first quarter of 2020. By comparison, 39 hedge funds held shares or bullish call options in EXEL a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Exelixis, Inc. (NASDAQ:EXEL), which was worth $329.5 million at the end of the second quarter. On the second spot was Farallon Capital which amassed $200.4 million worth of shares. Citadel Investment Group, Polar 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 Great Point Partners allocated the biggest weight to Exelixis, Inc. (NASDAQ:EXEL), around 5.33% of its 13F portfolio. Farallon Capital is also relatively very bullish on the stock, designating 0.89 percent of its 13F equity portfolio to EXEL.

Consequently, key money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized call position in Exelixis, Inc. (NASDAQ:EXEL). Balyasny Asset Management had $3.9 million invested in the company at the end of the quarter. Kamran Moghtaderi's Eversept Partners also initiated a $3.3 million position during the quarter. The other funds with brand new EXEL positions are Donald Sussman's Paloma Partners, Peter Muller's PDT Partners, and James Dondero's Highland Capital Management.

Let's also examine hedge fund activity in other stocks similar to Exelixis, Inc. (NASDAQ:EXEL). These stocks are Select Medical Holdings Corporation (NYSE:SEM), Herbalife Nutrition Ltd. (NYSE:HLF), TFS Financial Corporation (NASDAQ:TFSL), Fisker Inc. (NYSE:FSR), PLDT Inc. (NYSE:PHI), Celsius Holdings, Inc. (NASDAQ:CELH), and Acadia Healthcare Company Inc (NASDAQ:ACHC). All of these stocks' market caps resemble EXEL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEM,24,251021,2 HLF,40,2095168,0 TFSL,9,143366,3 FSR,16,256224,-6 PHI,5,88800,1 CELH,20,232853,5 ACHC,32,600143,2 Average,20.9,523939,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $803 million in EXEL's case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. Exelixis, Inc. (NASDAQ:EXEL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EXEL is 75.4. 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 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on EXEL as the stock returned 19.8% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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