Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Solid Biosciences Inc. (NASDAQ:SLDB) has experienced a decrease in activity from the world's largest hedge funds in recent months. Our calculations also showed that SLDB isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to review the fresh hedge fund action regarding Solid Biosciences Inc. (NASDAQ:SLDB).
Hedge fund activity in Solid Biosciences Inc. (NASDAQ:SLDB)
At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the fourth quarter of 2018. On the other hand, there were a total of 18 hedge funds with a bullish position in SLDB a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in Solid Biosciences Inc. (NASDAQ:SLDB) was held by Perceptive Advisors, which reported holding $36.1 million worth of stock at the end of March. It was followed by RA Capital Management with a $24.7 million position. Other investors bullish on the company included Citadel Investment Group, Cormorant Asset Management, and Millennium Management.
Because Solid Biosciences Inc. (NASDAQ:SLDB) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few money managers who sold off their entire stakes in the third quarter. Intriguingly, Christopher James's Partner Fund Management said goodbye to the largest stake of the "upper crust" of funds tracked by Insider Monkey, valued at about $35.8 million in stock, and Oleg Nodelman's EcoR1 Capital was right behind this move, as the fund cut about $23.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Solid Biosciences Inc. (NASDAQ:SLDB) but similarly valued. These stocks are Rockwell Medical Inc (NASDAQ:RMTI), Trilogy Metals Inc. (NYSE:TMQ), Camtek LTD. (NASDAQ:CAMT), and BSB Bancorp Inc (NASDAQ:BLMT). This group of stocks' market caps are similar to SLDB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RMTI,3,2056,1 TMQ,13,120065,1 CAMT,10,23041,0 BLMT,7,28681,1 Average,8.25,43461,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $73 million in SLDB's case. Trilogy Metals Inc. (NYSE:TMQ) is the most popular stock in this table. On the other hand Rockwell Medical Inc (NASDAQ:RMTI) is the least popular one with only 3 bullish hedge fund positions. Solid Biosciences Inc. (NASDAQ:SLDB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately SLDB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SLDB were disappointed as the stock returned -43.6% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.