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In this article we will check out the progression of hedge fund sentiment towards Solid Biosciences Inc. (NASDAQ:SLDB) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Solid Biosciences Inc. (NASDAQ:SLDB) has experienced an increase in activity from the world's largest hedge funds of late. Solid Biosciences Inc. (NASDAQ:SLDB) was in 24 hedge funds' portfolios at the end of March. The all time high for this statistic was previously 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 15 hedge funds in our database with SLDB positions at the end of the fourth quarter. Our calculations also showed that SLDB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Peter Kolchinsky of RA Capital Management
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Do Hedge Funds Think SLDB Is A Good Stock To Buy Now?
At first quarter's end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 60% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in SLDB a year ago. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Perceptive Advisors was the largest shareholder of Solid Biosciences Inc. (NASDAQ:SLDB), with a stake worth $74.2 million reported as of the end of March. Trailing Perceptive Advisors was RA Capital Management, which amassed a stake valued at $68.4 million. EcoR1 Capital, Suvretta Capital Management, and Citadel Investment Group 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 Solid Biosciences Inc. (NASDAQ:SLDB), around 2.26% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, earmarking 1.45 percent of its 13F equity portfolio to SLDB.
As aggregate interest increased, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Solid Biosciences Inc. (NASDAQ:SLDB). Marshall Wace LLP had $5.2 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $2.8 million investment in the stock during the quarter. The following funds were also among the new SLDB investors: Lawrence Hawkins's Prosight Capital, Cliff Asness's AQR Capital Management, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Solid Biosciences Inc. (NASDAQ:SLDB) but similarly valued. These stocks are Gilat Satellite Networks Ltd. (NASDAQ:GILT), Precision BioSciences, Inc. (NASDAQ:DTIL), Relmada Therapeutics, Inc. (NASDAQ:RLMD), AnaptysBio, Inc. (NASDAQ:ANAB), RADA Electronic Industries Ltd. (NASDAQ:RADA), Luxfer Holdings PLC (NYSE:LXFR), and El Pollo LoCo Holdings Inc (NASDAQ:LOCO). All of these stocks' market caps resemble SLDB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GILT,8,30252,3 DTIL,13,26260,2 RLMD,10,87095,0 ANAB,18,334096,-8 RADA,12,47111,1 LXFR,11,114521,1 LOCO,7,16417,-1 Average,11.3,93679,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.3 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $258 million in SLDB's case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand El Pollo LoCo Holdings Inc (NASDAQ:LOCO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Solid Biosciences Inc. (NASDAQ:SLDB) is more popular among hedge funds. Our overall hedge fund sentiment score for SLDB is 90. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately SLDB wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SLDB were disappointed as the stock returned -43.9% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.