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Hedge Funds Are Selling Xeris Pharmaceuticals, Inc. (XERS)

Debasis Saha

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 Xeris Pharmaceuticals, Inc. (NASDAQ:XERS).

Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) investors should pay attention to a decrease in support from the world's most elite money managers of late. XERS was in 4 hedge funds' portfolios at the end of the third quarter of 2019. There were 5 hedge funds in our database with XERS positions at the end of the previous quarter. Our calculations also showed that XERS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

[caption id="attachment_364894" align="alignnone" width="864"] James E. Flynn of Deerfield Management[/caption]

James Flynn Deerfield Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a glance at the key hedge fund action surrounding Xeris Pharmaceuticals, Inc. (NASDAQ:XERS).

How are hedge funds trading Xeris Pharmaceuticals, Inc. (NASDAQ:XERS)?

At Q3's end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in XERS over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is XERS A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Redmile Group, managed by Jeremy Green, holds the largest position in Xeris Pharmaceuticals, Inc. (NASDAQ:XERS). Redmile Group has a $29.5 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by James E. Flynn of Deerfield Management, with a $22.7 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish include Israel Englander's Millennium Management, Louis Bacon's Moore Global Investments and . In terms of the portfolio weights assigned to each position Redmile Group allocated the biggest weight to Xeris Pharmaceuticals, Inc. (NASDAQ:XERS), around 0.99% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, designating 0.93 percent of its 13F equity portfolio to XERS.

Since Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) has faced bearish sentiment from hedge fund managers, logic holds that there were a few hedgies who were dropping their positions entirely in the third quarter. Intriguingly, Renaissance Technologies dropped the biggest stake of the 750 funds watched by Insider Monkey, comprising about $0.2 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund cut about $0 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) but similarly valued. These stocks are Northrim BanCorp, Inc. (NASDAQ:NRIM), Ames National Corporation (NASDAQ:ATLO), Unity Biotechnology, Inc. (NASDAQ:UBX), and Compugen Ltd. (NASDAQ:CGEN). This group of stocks' market caps are closest to XERS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NRIM,7,29237,-1 ATLO,3,21073,0 UBX,4,4111,-1 CGEN,4,7644,-1 Average,4.5,15516,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $54 million in XERS's case. Northrim BanCorp, Inc. (NASDAQ:NRIM) is the most popular stock in this table. On the other hand Ames National Corporation (NASDAQ:ATLO) is the least popular one with only 3 bullish hedge fund positions. Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately XERS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); XERS investors were disappointed as the stock returned -9.2% during the first two months of the fourth 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 among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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