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 Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX).
Is LXRX a good stock to buy now? Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) has seen a decrease in support from the world's most elite money managers of late. Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) was in 9 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 18. There were 11 hedge funds in our database with LXRX holdings at the end of June. Our calculations also showed that LXRX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons founder of Renaissance Technologies
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to review the recent hedge fund action regarding Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX).
Do Hedge Funds Think LXRX Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in LXRX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), which was worth $2.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $1.6 million worth of shares. D E Shaw, AQR Capital Management, and Winton Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), around 0.02% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, designating 0.0026 percent of its 13F equity portfolio to LXRX.
Seeing as Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there was a specific group of hedge funds who sold off their positions entirely heading into Q4. It's worth mentioning that Ken Griffin's Citadel Investment Group dumped the largest investment of the 750 funds tracked by Insider Monkey, totaling about $17.5 million in stock, and John Overdeck and David Siegel's Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX). We will take a look at Ames National Corporation (NASDAQ:ATLO), Steel Partners Holdings LP (NYSE:SPLP), VolitionRX Limited (NYSE:VNRX), Fennec Pharmaceuticals Inc. (NASDAQ:FENC), Cherry Hill Mortgage Investment Corp (NYSE:CHMI), AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), and Standard AVB Financial Corp. (NASDAQ:STND). All of these stocks' market caps match LXRX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATLO,4,9694,1 SPLP,4,12895,1 VNRX,2,221,-2 FENC,6,56441,-1 CHMI,8,17876,-2 AVEO,8,7851,-5 STND,3,8593,2 Average,5,16224,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $7 million in LXRX's case. Cherry Hill Mortgage Investment Corp (NYSE:CHMI) is the most popular stock in this table. On the other hand VolitionRX Limited (NYSE:VNRX) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) is more popular among hedge funds. Our overall hedge fund sentiment score for LXRX is 68. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on LXRX as the stock returned 113.9% since the end of September (through 12/8) 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.