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Is Exela Technologies (XELA) A Good Stock To Buy Now?

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·6 min read
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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Exela Technologies, Inc. (NASDAQ:XELA).

Is Exela Technologies, Inc. (NASDAQ:XELA) a good stock to buy now? Prominent investors were selling. The number of long hedge fund positions went down by 4 in recent months. Exela Technologies, Inc. (NASDAQ:XELA) was in 5 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 15. Our calculations also showed that XELA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 9 hedge funds in our database with XELA holdings at the end of June.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a lot of metrics stock traders have at their disposal to grade their stock investments. A couple of the less utilized metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top investment managers can beat their index-focused peers by a very impressive margin (see the details here).

Donald Sussman Paloma Partners
Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let's take a glance at the recent hedge fund action regarding Exela Technologies, Inc. (NASDAQ:XELA).

What have hedge funds been doing with Exela Technologies, Inc. (NASDAQ:XELA)?

At third quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -44% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards XELA over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is XELA A Good Stock To Buy?
Is XELA A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, holds the most valuable position in Exela Technologies, Inc. (NASDAQ:XELA). Nantahala Capital Management has a $5.8 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Donald Sussman of Paloma Partners, with a $0.7 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Curtis Schenker and Craig Effron's Scoggin and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Nantahala Capital Management allocated the biggest weight to Exela Technologies, Inc. (NASDAQ:XELA), around 0.18% of its 13F portfolio. Scoggin is also relatively very bullish on the stock, earmarking 0.13 percent of its 13F equity portfolio to XELA.

Due to the fact that Exela Technologies, Inc. (NASDAQ:XELA) has experienced falling interest from hedge fund managers, logic holds that there were a few fund managers who were dropping their positions entirely in the third quarter. At the top of the heap, David Einhorn's Greenlight Capital sold off the biggest position of the 750 funds monitored by Insider Monkey, comprising about $0.6 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund dumped about $0.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the third quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Exela Technologies, Inc. (NASDAQ:XELA) but similarly valued. These stocks are Allena Pharmaceuticals, Inc. (NASDAQ:ALNA), HyreCar Inc. (NASDAQ:HYRE), Aqua Metals, Inc. (NASDAQ:AQMS), Richardson Electronics, Ltd. (NASDAQ:RELL), CohBar, Inc. (NASDAQ:CWBR), Red Lion Hotels Corporation (NYSE:RLH), and Community First Bancshares, Inc. (NASDAQ:CFBI). This group of stocks' market caps match XELA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALNA,2,5350,-4 HYRE,8,10722,2 AQMS,2,3014,-1 RELL,4,9308,0 CWBR,2,432,0 RLH,9,23046,-2 CFBI,1,442,0 Average,4,7473,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $7 million in XELA's case. Red Lion Hotels Corporation (NYSE:RLH) is the most popular stock in this table. On the other hand Community First Bancshares, Inc. (NASDAQ:CFBI) is the least popular one with only 1 bullish hedge fund positions. Exela Technologies, Inc. (NASDAQ:XELA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XELA is 36. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and beat the market again by 16.1 percentage points. Unfortunately XELA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on XELA were disappointed as the stock returned 3.7% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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