In this article we will check out the progression of hedge fund sentiment towards Sorrentto Therapeutics Inc (NASDAQ:SRNE) 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.
Sorrentto Therapeutics Inc (NASDAQ:SRNE) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), Puma Biotechnology Inc (NYSE:PBYI), and Betterware de Mexico, S.A. de C.V. (NASDAQ:BWMX) to gather more data points. Our calculations also showed that SRNE 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.
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. 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 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to go over the key hedge fund action regarding Sorrentto Therapeutics Inc (NASDAQ:SRNE).
What does smart money think about Sorrentto Therapeutics Inc (NASDAQ:SRNE)?
Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SRNE over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Cormorant Asset Management held the most valuable stake in Sorrentto Therapeutics Inc (NASDAQ:SRNE), which was worth $9.2 million at the end of the third quarter. On the second spot was Sabby Capital which amassed $0.5 million worth of shares. D E Shaw, Citadel Investment Group, and Millennium 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 Cormorant Asset Management allocated the biggest weight to Sorrentto Therapeutics Inc (NASDAQ:SRNE), around 0.43% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, designating 0.22 percent of its 13F equity portfolio to SRNE.
Due to the fact that Sorrentto Therapeutics Inc (NASDAQ:SRNE) has experienced bearish sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of hedge funds that slashed their entire stakes in the first quarter. At the top of the heap, David Rosen's Rubric Capital Management dumped the biggest investment of the "upper crust" of funds watched by Insider Monkey, worth an estimated $1.5 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also dumped its stock, about $0 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Sorrentto Therapeutics Inc (NASDAQ:SRNE) but similarly valued. We will take a look at Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), Puma Biotechnology Inc (NYSE:PBYI), Betterware de Mexico, S.A. de C.V. (NASDAQ:BWMX), and AMC Entertainment Holdings Inc (NYSE:AMC). This group of stocks' market valuations match SRNE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNDX,19,74473,8 PBYI,20,100494,3 BWMX,2,622,2 AMC,14,32247,-5 Average,13.75,51959,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $10 million in SRNE's case. Puma Biotechnology Inc (NYSE:PBYI) is the most popular stock in this table. On the other hand Betterware de Mexico, S.A. de C.V. (NASDAQ:BWMX) is the least popular one with only 2 bullish hedge fund positions. Sorrentto Therapeutics Inc (NASDAQ:SRNE) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on SRNE as the stock returned 174.5% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.