At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Xtant Medical Holdings, Inc. (NYSE:XTNT).
Hedge fund interest in Xtant Medical Holdings, Inc. (NYSE:XTNT) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare XTNT to other stocks including Superior Drilling Products, Inc. (NYSE:SDPI), Sonoma Pharmaceuticals, Inc. (NASDAQ:SNOA), and MICT, Inc. (NASDAQ:MICT) to get a better sense of its popularity. 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 44 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_341400" align="aligncenter" width="399"] Samuel Isaly of OrbiMed Advisors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's analyze the recent hedge fund action regarding Xtant Medical Holdings, Inc. (NYSE:XTNT).
What does smart money think about Xtant Medical Holdings, Inc. (NYSE:XTNT)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in XTNT over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Xtant Medical Holdings, Inc. (NYSE:XTNT) was held by OrbiMed Advisors, which reported holding $6.2 million worth of stock at the end of September. It was followed by Park West Asset Management with a $0.8 million position. The only other hedge fund that is bullish on the company was Renaissance Technologies.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks similar to Xtant Medical Holdings, Inc. (NYSE:XTNT). These stocks are Superior Drilling Products, Inc. (NYSE:SDPI), Sonoma Pharmaceuticals, Inc. (NASDAQ:SNOA), MICT, Inc. (NASDAQ:MICT), and Midatech Pharma PLC (NASDAQ:MTP). This group of stocks' market valuations are similar to XTNT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SDPI,1,155,-1 SNOA,1,341,0 MICT,1,46,0 MTP,1,27,0 Average,1,142,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $7 million in XTNT's case. Superior Drilling Products, Inc. (NYSE:SDPI) is the most popular stock in this table. On the other hand Superior Drilling Products, Inc. (NYSE:SDPI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Xtant Medical Holdings, Inc. (NYSE:XTNT) 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 returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on XTNT as the stock returned 131.3% so far in Q2 (through May 22nd) 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.
Disclosure: None. This article was originally published at Insider Monkey.