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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider Xenon Pharmaceuticals Inc (NASDAQ:XENE) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is Xenon Pharmaceuticals Inc (NASDAQ:XENE) a splendid stock to buy now? Money managers were in an optimistic mood. The number of bullish hedge fund positions improved by 1 lately. Xenon Pharmaceuticals Inc (NASDAQ:XENE) was in 28 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that XENE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 27 hedge funds in our database with XENE 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.
Paul Marshall of Marshall Wace
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 review the key hedge fund action encompassing Xenon Pharmaceuticals Inc (NASDAQ:XENE).
Do Hedge Funds Think XENE Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards XENE over the last 24 quarters. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Xenon Pharmaceuticals Inc (NASDAQ:XENE) was held by 0, which reported holding $68 million worth of stock at the end of June. It was followed by Sphera Global Healthcare Fund with a $51.4 million position. Other investors bullish on the company included Perceptive Advisors, Biotechnology Value Fund / BVF Inc, and Adage Capital Management. In terms of the portfolio weights assigned to each position Ghost Tree Capital allocated the biggest weight to Xenon Pharmaceuticals Inc (NASDAQ:XENE), around 4.35% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, dishing out 3.48 percent of its 13F equity portfolio to XENE.
As industrywide interest jumped, specific money managers have been driving this bullishness. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, initiated the biggest position in Xenon Pharmaceuticals Inc (NASDAQ:XENE). Sphera Global Healthcare Fund had $51.4 million invested in the company at the end of the quarter. Andre F. Perold's HighVista Strategies also initiated a $0.8 million position during the quarter. The only other fund with a new position in the stock is Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's go over hedge fund activity in other stocks similar to Xenon Pharmaceuticals Inc (NASDAQ:XENE). These stocks are QCR Holdings, Inc. (NASDAQ:QCRH), Amneal Pharmaceuticals, Inc. (NYSE:AMRX), Maverix Metals Inc. (NYSE:MMX), Bristow Group, Inc. (NYSE:VTOL), Myers Industries, Inc. (NYSE:MYE), State Auto Financial Corporation (NASDAQ:STFC), and Argan, Inc. (NYSE:AGX). This group of stocks' market valuations match XENE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QCRH,15,80942,2 AMRX,17,53670,2 MMX,10,33505,4 VTOL,14,248948,1 MYE,9,109819,-1 STFC,5,5093,-3 AGX,12,46321,0 Average,11.7,82614,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $414 million in XENE's case. Amneal Pharmaceuticals, Inc. (NYSE:AMRX) is the most popular stock in this table. On the other hand State Auto Financial Corporation (NASDAQ:STFC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Xenon Pharmaceuticals Inc (NASDAQ:XENE) is more popular among hedge funds. Our overall hedge fund sentiment score for XENE is 86. 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 returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on XENE as the stock returned 80.8% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.