The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Xenon Pharmaceuticals Inc (NASDAQ:XENE) based on those filings.
Xenon Pharmaceuticals Inc (NASDAQ:XENE) investors should pay attention to an increase in hedge fund sentiment lately. Our calculations also showed that XENE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_221556" align="aligncenter" width="399"] Richard Driehaus of Driehaus Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a glance at the latest hedge fund action surrounding Xenon Pharmaceuticals Inc (NASDAQ:XENE).
How are hedge funds trading Xenon Pharmaceuticals Inc (NASDAQ:XENE)?
At Q1's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in XENE over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Avoro Capital Advisors (venBio Select Advisor) held the most valuable stake in Xenon Pharmaceuticals Inc (NASDAQ:XENE), which was worth $31.4 million at the end of the third quarter. On the second spot was Biotechnology Value Fund / BVF Inc which amassed $30.3 million worth of shares. Adage Capital Management, Consonance Capital Management, and OrbiMed Advisors 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 Aquilo Capital Management allocated the biggest weight to Xenon Pharmaceuticals Inc (NASDAQ:XENE), around 6.63% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, earmarking 3.45 percent of its 13F equity portfolio to XENE.
Consequently, key hedge funds were breaking ground themselves. Consonance Capital Management, managed by Mitchell Blutt, created the biggest position in Xenon Pharmaceuticals Inc (NASDAQ:XENE). Consonance Capital Management had $22.4 million invested in the company at the end of the quarter. Manfred Yu's Acuta Capital Partners also initiated a $7.1 million position during the quarter. The other funds with new positions in the stock are Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management, Richard Driehaus's Driehaus Capital, and Ken Greenberg and David Kim's Ghost Tree Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Xenon Pharmaceuticals Inc (NASDAQ:XENE) but similarly valued. We will take a look at Maverix Metals Inc. (NYSE:MMX), Byline Bancorp, Inc. (NYSE:BY), Verso Corporation (NYSE:VRS), and Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX). This group of stocks' market values match XENE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MMX,3,12394,1 BY,10,10976,0 VRS,20,92202,-2 CPRX,20,79699,1 Average,13.25,48818,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $218 million in XENE's case. Verso Corporation (NYSE:VRS) is the most popular stock in this table. On the other hand Maverix Metals Inc. (NYSE:MMX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Xenon Pharmaceuticals Inc (NASDAQ:XENE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on XENE, though not to the same extent, as the stock returned 20.8% in Q2 (through the end of May) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.