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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 (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 Xencor Inc (NASDAQ:XNCR) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Xencor Inc (NASDAQ:XNCR) investors should be aware of an increase in hedge fund sentiment recently. Xencor Inc (NASDAQ:XNCR) was in 19 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. Our calculations also showed that XNCR isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are plenty of metrics market participants have at their disposal to analyze their holdings. Two of the less known metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outclass the market by a very impressive amount (see the details here).
Bruce Kovner of Caxton Associates LP
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let's analyze the key hedge fund action encompassing Xencor Inc (NASDAQ:XNCR).
How have hedgies been trading Xencor Inc (NASDAQ:XNCR)?
At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards XNCR over the last 20 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Xencor Inc (NASDAQ:XNCR) was held by EcoR1 Capital, which reported holding $147.3 million worth of stock at the end of September. It was followed by Biotechnology Value Fund / BVF Inc with a $67 million position. Other investors bullish on the company included Baker Bros. Advisors, GLG Partners, and Rhenman & Partners Asset Management. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Xencor Inc (NASDAQ:XNCR), around 10.88% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, dishing out 4.13 percent of its 13F equity portfolio to XNCR.
Now, some big names have jumped into Xencor Inc (NASDAQ:XNCR) headfirst. PDT Partners, managed by Peter Muller, created the biggest position in Xencor Inc (NASDAQ:XNCR). PDT Partners had $1.4 million invested in the company at the end of the quarter. Parvinder Thiara's Athanor Capital also made a $1.3 million investment in the stock during the quarter. The following funds were also among the new XNCR investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, John Overdeck and David Siegel's Two Sigma Advisors, and Bruce Kovner's Caxton Associates LP.
Let's now take a look at hedge fund activity in other stocks similar to Xencor Inc (NASDAQ:XNCR). These stocks are PriceSmart, Inc. (NASDAQ:PSMT), Norbord Inc. (NYSE:OSB), Eidos Therapeutics, Inc. (NASDAQ:EIDX), SPX Corporation (NYSE:SPXC), Greif, Inc. (NYSE:GEF), Badger Meter, Inc. (NYSE:BMI), and Summit Materials Inc (NYSE:SUM). All of these stocks' market caps match XNCR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PSMT,12,38375,1 OSB,11,41064,-1 EIDX,17,251223,5 SPXC,18,44381,4 GEF,17,65777,0 BMI,20,139359,0 SUM,23,221014,-4 Average,16.9,114456,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $266 million in XNCR's case. Summit Materials Inc (NYSE:SUM) is the most popular stock in this table. On the other hand Norbord Inc. (NYSE:OSB) is the least popular one with only 11 bullish hedge fund positions. Xencor Inc (NASDAQ:XNCR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XNCR is 67.1. 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 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 gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on XNCR as the stock returned 19.8% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.