Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards EXACT Sciences Corporation (NASDAQ:EXAS).
EXACT Sciences Corporation (NASDAQ:EXAS) was in 32 hedge funds' portfolios at the end of the second quarter of 2019. EXAS has seen a decrease in hedge fund interest in recent months. There were 33 hedge funds in our database with EXAS holdings at the end of the previous quarter. Our calculations also showed that EXAS isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the key hedge fund action surrounding EXACT Sciences Corporation (NASDAQ:EXAS).
Hedge fund activity in EXACT Sciences Corporation (NASDAQ:EXAS)
Heading into the third quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in EXAS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Viking Global, managed by Andreas Halvorsen, holds the largest position in EXACT Sciences Corporation (NASDAQ:EXAS). Viking Global has a $267.3 million position in the stock, comprising 1.2% of its 13F portfolio. The second most bullish fund manager is D E Shaw, managed by D. E. Shaw, which holds a $192.8 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions consist of Christopher James's Partner Fund Management, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management and Renaissance Technologies.
Since EXACT Sciences Corporation (NASDAQ:EXAS) has witnessed falling interest from hedge fund managers, it's easy to see that there were a few hedge funds that elected to cut their positions entirely in the second quarter. Interestingly, Michael Platt and William Reeves's BlueCrest Capital Mgmt. sold off the largest position of the 750 funds tracked by Insider Monkey, totaling an estimated $12.8 million in stock, and Michael Johnston's Steelhead Partners was right behind this move, as the fund dropped about $7 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds in the second quarter.
Let's also examine hedge fund activity in other stocks similar to EXACT Sciences Corporation (NASDAQ:EXAS). These stocks are Waters Corporation (NYSE:WAT), Regions Financial Corporation (NYSE:RF), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and Xylem Inc (NYSE:XYL). This group of stocks' market values match EXAS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAT,26,603252,-4 RF,32,700009,-9 BMRN,45,2076416,4 XYL,19,674762,6 Average,30.5,1013610,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $1014 million. That figure was $837 million in EXAS's case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 19 bullish hedge fund positions. EXACT Sciences Corporation (NASDAQ:EXAS) is not the most popular stock in this group but hedge fund interest is still above average. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately EXAS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EXAS were disappointed as the stock returned -23.4% during the third quarter 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 (view the video below) among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.