The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Sarepta Therapeutics Inc (NASDAQ:SRPT) and determine whether the smart money was really smart about this stock.
Is Sarepta Therapeutics Inc (NASDAQ:SRPT) worth your attention right now? The best stock pickers were getting more optimistic. The number of long hedge fund bets advanced by 6 recently. Sarepta Therapeutics Inc (NASDAQ:SRPT) was in 39 hedge funds' portfolios at the end of June. The all time high for this statistics is 48. Our calculations also showed that SRPT 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
James E. Flynn of Deerfield 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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let's review the fresh hedge fund action surrounding Sarepta Therapeutics Inc (NASDAQ:SRPT).
Hedge fund activity in Sarepta Therapeutics Inc (NASDAQ:SRPT)
At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SRPT over the last 20 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, holds the biggest position in Sarepta Therapeutics Inc (NASDAQ:SRPT). Avoro Capital Advisors (venBio Select Advisor) has a $268.6 million position in the stock, comprising 5.3% of its 13F portfolio. The second most bullish fund manager is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $176.4 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions contain Samuel Isaly's OrbiMed Advisors, Eli Casdin's Casdin Capital and Farallon Capital. In terms of the portfolio weights assigned to each position Avoro Capital Advisors (venBio Select Advisor) allocated the biggest weight to Sarepta Therapeutics Inc (NASDAQ:SRPT), around 5.31% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, designating 5.03 percent of its 13F equity portfolio to SRPT.
As one would reasonably expect, specific money managers were breaking ground themselves. Duquesne Capital, managed by Stanley Druckenmiller, initiated the largest position in Sarepta Therapeutics Inc (NASDAQ:SRPT). Duquesne Capital had $27.2 million invested in the company at the end of the quarter. Kamran Moghtaderi's Eversept Partners also initiated a $11.5 million position during the quarter. The other funds with brand new SRPT positions are Noam Gottesman's GLG Partners, Guy Levy's Soleus Capital, and Paul Tudor Jones's Tudor Investment Corp.
Let's now review hedge fund activity in other stocks similar to Sarepta Therapeutics Inc (NASDAQ:SRPT). We will take a look at Hewlett Packard Enterprise Company (NYSE:HPE), Grifols SA (NASDAQ:GRFS), Nucor Corporation (NYSE:NUE), FactSet Research Systems Inc. (NYSE:FDS), Seagate Technology plc (NASDAQ:STX), Masimo Corporation (NASDAQ:MASI), and AngloGold Ashanti Limited (NYSE:AU). This group of stocks' market valuations are similar to SRPT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HPE,31,693633,2 GRFS,21,583023,-2 NUE,26,115702,0 FDS,21,200608,0 STX,27,2100119,-5 MASI,32,160712,1 AU,16,726270,-3 Average,24.9,654295,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $654 million. That figure was $1148 million in SRPT's case. Masimo Corporation (NASDAQ:MASI) is the most popular stock in this table. On the other hand AngloGold Ashanti Limited (NYSE:AU) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Sarepta Therapeutics Inc (NASDAQ:SRPT) is more popular among hedge funds. Our overall hedge fund sentiment score for SRPT is 84.4. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately SRPT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SRPT were disappointed as the stock returned -8.7% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.