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). 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 Strongbridge Biopharma plc (NASDAQ:SBBP) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Strongbridge Biopharma plc (NASDAQ:SBBP) investors should pay attention to an increase in enthusiasm from smart money of late. Our calculations also showed that SBBP isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
According to most investors, hedge funds are viewed as worthless, outdated financial tools of the past. While there are more than 8000 funds trading at present, We look at the upper echelon of this club, around 850 funds. These money managers oversee the majority of the hedge fund industry's total capital, and by monitoring their inimitable picks, Insider Monkey has determined several investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_735677" align="aligncenter" width="400"] Sander Gerber of Hudson Bay Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the new hedge fund action surrounding Strongbridge Biopharma plc (NASDAQ:SBBP).
What does smart money think about Strongbridge Biopharma plc (NASDAQ:SBBP)?
At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SBBP over the last 18 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.
Among these funds, Ikarian Capital held the most valuable stake in Strongbridge Biopharma plc (NASDAQ:SBBP), which was worth $6.4 million at the end of the third quarter. On the second spot was Hudson Bay Capital Management which amassed $2.7 million worth of shares. Renaissance Technologies, 683 Capital Partners, and D E Shaw 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 Ikarian Capital allocated the biggest weight to Strongbridge Biopharma plc (NASDAQ:SBBP), around 0.48% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, dishing out 0.22 percent of its 13F equity portfolio to SBBP.
As one would reasonably expect, key hedge funds have been driving this bullishness. Ikarian Capital, managed by Neil Shahrestani, assembled the largest position in Strongbridge Biopharma plc (NASDAQ:SBBP). Ikarian Capital had $6.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Peter Algert and Kevin Coldiron's Algert Coldiron Investors.
Let's also examine hedge fund activity in other stocks similar to Strongbridge Biopharma plc (NASDAQ:SBBP). We will take a look at Sierra Oncology, Inc. (NASDAQ:SRRA), Drive Shack Inc. (NYSE:DS), Ceragon Networks Ltd. (NASDAQ:CRNT), and Cassava Sciences, Inc. (NASDAQ:SAVA). This group of stocks' market values match SBBP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SRRA,9,42852,0 DS,3,711,-1 CRNT,3,4412,-1 SAVA,5,7572,0 Average,5,13887,-0.5 [/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 $14 million. That figure was $13 million in SBBP's case. Sierra Oncology, Inc. (NASDAQ:SRRA) is the most popular stock in this table. On the other hand Drive Shack Inc. (NYSE:DS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Strongbridge Biopharma plc (NASDAQ:SBBP) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on SBBP as the stock returned 100% in Q2 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.