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Is XNCR A Good Stock To Buy Now?

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Debasis Saha
·6 min read
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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Xencor Inc (NASDAQ:XNCR).

Is XNCR a good stock to buy now? Xencor Inc (NASDAQ:XNCR) was in 18 hedge funds' portfolios at the end of September. The all time high for this statistic is 24. XNCR has experienced a decrease in hedge fund interest lately. There were 19 hedge funds in our database with XNCR holdings at the end of June. Our calculations also showed that XNCR 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 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 S&P 500 ETFs by 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 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.

Henrik Rhenman of Rhenman & Partners Asset Management

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. Keeping this in mind let's check out the new hedge fund action regarding Xencor Inc (NASDAQ:XNCR).

Do Hedge Funds Think XNCR Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards XNCR over the last 21 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is XNCR A Good Stock To Buy?
Is XNCR A Good Stock To Buy?

Among these funds, EcoR1 Capital held the most valuable stake in Xencor Inc (NASDAQ:XNCR), which was worth $176.4 million at the end of the third quarter. On the second spot was Biotechnology Value Fund / BVF Inc which amassed $80.2 million worth of shares. Baker Bros. Advisors, Rhenman & Partners Asset 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 EcoR1 Capital allocated the biggest weight to Xencor Inc (NASDAQ:XNCR), around 12.58% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, earmarking 4.37 percent of its 13F equity portfolio to XNCR.

Since Xencor Inc (NASDAQ:XNCR) has experienced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there was a specific group of funds who sold off their full holdings in the third quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest position of all the hedgies monitored by Insider Monkey, worth an estimated $3.7 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund cut about $2.3 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Xencor Inc (NASDAQ:XNCR) but similarly valued. These stocks are Shenandoah Telecommunications Company (NASDAQ:SHEN), Golub Capital BDC Inc (NASDAQ:GBDC), Glaukos Corporation (NYSE:GKOS), WESCO International, Inc. (NYSE:WCC), LivaNova PLC (NASDAQ:LIVN), Atlas Corp. (NYSE:ATCO), and VEON Ltd. (NASDAQ:VEON). All of these stocks' market caps are similar to XNCR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHEN,9,85112,1 GBDC,11,33376,-5 GKOS,15,126038,-3 WCC,29,612264,-5 LIVN,26,290777,-3 ATCO,10,922622,-2 VEON,8,16266,2 Average,15.4,298065,-2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $301 million in XNCR's case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 8 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 50.3. 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 gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on XNCR as the stock returned 18.4% since the end of Q3 (through 12/14) 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.

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