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In this article we will check out the progression of hedge fund sentiment towards Exelixis, Inc. (NASDAQ:EXEL) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Exelixis, Inc. (NASDAQ:EXEL) was in 27 hedge funds' portfolios at the end of March. The all time high for this statistic is 39. EXEL has seen an increase in hedge fund sentiment of late. There were 24 hedge funds in our database with EXEL positions at the end of the fourth quarter. Our calculations also showed that EXEL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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 go over the fresh hedge fund action regarding Exelixis, Inc. (NASDAQ:EXEL).
Do Hedge Funds Think EXEL Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EXEL over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Exelixis, Inc. (NASDAQ:EXEL) was held by Renaissance Technologies, which reported holding $420.9 million worth of stock at the end of December. It was followed by Farallon Capital with a $242.8 million position. Other investors bullish on the company included Citadel Investment Group, Polar Capital, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to Exelixis, Inc. (NASDAQ:EXEL), around 5.61% of its 13F portfolio. Farallon Capital is also relatively very bullish on the stock, dishing out 1.35 percent of its 13F equity portfolio to EXEL.
Consequently, specific money managers have been driving this bullishness. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), assembled the most valuable position in Exelixis, Inc. (NASDAQ:EXEL). Schonfeld Strategic Advisors had $5.2 million invested in the company at the end of the quarter. Bhagwan Jay Rao's Integral Health Asset Management also initiated a $4.5 million position during the quarter. The following funds were also among the new EXEL investors: Israel Englander's Millennium Management, Efrem Kamen's Pura Vida Investments, and Mark Broach's Manatuck Hill Partners.
Let's now take a look at hedge fund activity in other stocks similar to Exelixis, Inc. (NASDAQ:EXEL). These stocks are United States Steel Corporation (NYSE:X), Vertiv Holdings Co (NYSE:VRT), Columbia Sportswear Company (NASDAQ:COLM), Toll Brothers Inc (NYSE:TOL), Prosperity Bancshares, Inc. (NYSE:PB), MasTec, Inc. (NYSE:MTZ), and Mattel, Inc. (NASDAQ:MAT). This group of stocks' market caps match EXEL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position X,22,635515,-15 VRT,39,997190,-11 COLM,21,185359,7 TOL,30,699227,-4 PB,21,96958,5 MTZ,36,334673,4 MAT,25,872671,0 Average,27.7,545942,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $546 million. That figure was $992 million in EXEL's case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand Columbia Sportswear Company (NASDAQ:COLM) is the least popular one with only 21 bullish hedge fund positions. Exelixis, Inc. (NASDAQ:EXEL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EXEL is 45.4. 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. 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 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately EXEL wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EXEL investors were disappointed as the stock returned -20.3% since the end of March (through 7/9) 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.