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Hedge Funds Dipping Their Toes Into Silk Road Medical, Inc. (SILK)

Debasis Saha
·6 min read

The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Silk Road Medical, Inc. (NASDAQ:SILK) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Silk Road Medical, Inc. (NASDAQ:SILK) investors should pay attention to an increase in hedge fund interest in recent months. Silk Road Medical, Inc. (NASDAQ:SILK) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistics is 12. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SILK 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.

According to most traders, hedge funds are perceived as worthless, outdated financial tools of the past. While there are greater than 8000 funds trading at present, We look at the aristocrats of this club, approximately 850 funds. Most estimates calculate that this group of people orchestrate the majority of the smart money's total capital, and by tailing their best picks, Insider Monkey has identified many investment strategies that have historically surpassed Mr. Market. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

MOORE GLOBAL INVESTMENTS
MOORE GLOBAL INVESTMENTS

Louis Bacon Moore of Moore Capital

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 review the recent hedge fund action regarding Silk Road Medical, Inc. (NASDAQ:SILK).

How are hedge funds trading Silk Road Medical, Inc. (NASDAQ:SILK)?

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SILK over the last 20 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Is SILK A Good Stock To Buy?
Is SILK A Good Stock To Buy?

More specifically, Deerfield Management was the largest shareholder of Silk Road Medical, Inc. (NASDAQ:SILK), with a stake worth $31.2 million reported as of the end of September. Trailing Deerfield Management was Sectoral Asset Management, which amassed a stake valued at $21.9 million. Perceptive Advisors, Alyeska Investment Group, and Rhenman & Partners Asset 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 Sectoral Asset Management allocated the biggest weight to Silk Road Medical, Inc. (NASDAQ:SILK), around 2.01% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, setting aside 1.42 percent of its 13F equity portfolio to SILK.

As industrywide interest jumped, key hedge funds have jumped into Silk Road Medical, Inc. (NASDAQ:SILK) headfirst. Pura Vida Investments, managed by Efrem Kamen, assembled the largest position in Silk Road Medical, Inc. (NASDAQ:SILK). Pura Vida Investments had $5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $1.6 million investment in the stock during the quarter. The other funds with brand new SILK positions are Guy Levy's Soleus Capital, Louis Bacon's Moore Global Investments, and Matthew Halbower's Pentwater Capital Management.

Let's now take a look at hedge fund activity in other stocks similar to Silk Road Medical, Inc. (NASDAQ:SILK). We will take a look at Renasant Corporation (NASDAQ:RNST), Knowles Corp (NYSE:KN), Revance Therapeutics Inc (NASDAQ:RVNC), Akcea Therapeutics, Inc. (NASDAQ:AKCA), Forward Air Corporation (NASDAQ:FWRD), Zealand Pharma A/S (NASDAQ:ZEAL), and Gray Television, Inc. (NYSE:GTN). All of these stocks' market caps are similar to SILK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RNST,10,8447,-2 KN,24,236994,4 RVNC,14,109451,3 AKCA,11,19426,0 FWRD,15,82471,-2 ZEAL,3,18760,0 GTN,26,134514,5 Average,14.7,87152,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $104 million in SILK's case. Gray Television, Inc. (NYSE:GTN) is the most popular stock in this table. On the other hand Zealand Pharma A/S (NASDAQ:ZEAL) is the least popular one with only 3 bullish hedge fund positions. Silk Road Medical, Inc. (NASDAQ:SILK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SILK is 40. 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 SILK as the stock returned 60.4% 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.

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