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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sarepta Therapeutics Inc (NASDAQ:SRPT).
Sarepta Therapeutics Inc (NASDAQ:SRPT) was in 34 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 48. SRPT shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. There were 33 hedge funds in our database with SRPT positions at the end of the first quarter. Our calculations also showed that SRPT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Phillip Gross of Adage Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a glance at the latest hedge fund action encompassing Sarepta Therapeutics Inc (NASDAQ:SRPT).
Do Hedge Funds Think SRPT Is A Good Stock To Buy Now?
At Q2's end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in SRPT over the last 24 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, holds the most valuable position in Sarepta Therapeutics Inc (NASDAQ:SRPT). Avoro Capital Advisors (venBio Select Advisor) has a $186.6 million position in the stock, comprising 3.2% of its 13F portfolio. The second largest stake is held by Casdin Capital, led by Eli Casdin, holding a $68.8 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Ken Griffin's Citadel Investment Group, Catherine D. Wood's ARK Investment Management and Steve Cohen's Point72 Asset Management. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Sarepta Therapeutics Inc (NASDAQ:SRPT), around 3.83% of its 13F portfolio. Avoro Capital Advisors (venBio Select Advisor) is also relatively very bullish on the stock, dishing out 3.25 percent of its 13F equity portfolio to SRPT.
As one would reasonably expect, some big names have jumped into Sarepta Therapeutics Inc (NASDAQ:SRPT) headfirst. Consonance Capital Management, managed by Mitchell Blutt, created the largest position in Sarepta Therapeutics Inc (NASDAQ:SRPT). Consonance Capital Management had $31.8 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson's Adage Capital Management also made a $28 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Frank Fu's CaaS Capital, and Vishal Saluja and Pham Quang's Endurant Capital Management.
Let's now review hedge fund activity in other stocks similar to Sarepta Therapeutics Inc (NASDAQ:SRPT). We will take a look at Louisiana-Pacific Corporation (NYSE:LPX), Vir Biotechnology, Inc. (NASDAQ:VIR), Terminix Global Holdings, Inc. (NYSE:TMX), The Timken Company (NYSE:TKR), Perrigo Co Plc (NASDAQ:PRGO), Varonis Systems Inc (NASDAQ:VRNS), and Penske Automotive Group, Inc. (NYSE:PAG). This group of stocks' market valuations match SRPT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LPX,39,852143,9 VIR,11,34719,2 TMX,22,417570,-5 TKR,22,155285,-1 PRGO,28,457403,-5 VRNS,24,336746,-8 PAG,19,188147,7 Average,23.6,348859,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $349 million. That figure was $540 million in SRPT's case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Vir Biotechnology, Inc. (NASDAQ:VIR) is the least popular one with only 11 bullish hedge fund positions. Sarepta Therapeutics Inc (NASDAQ:SRPT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SRPT is 68.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on SRPT as the stock returned 17.4% since the end of Q2 (through 10/11) 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.