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Is Sarepta Therapeutics Inc (SRPT) Going to Burn These Hedge Funds?

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Sarepta Therapeutics Inc (NASDAQ:SRPT)?

Sarepta Therapeutics Inc (NASDAQ:SRPT) shareholders have witnessed a decrease in support from the world's most elite money managers recently. SRPT was in 33 hedge funds' portfolios at the end of the first quarter of 2020. There were 42 hedge funds in our database with SRPT positions at the end of the previous quarter. Our calculations also showed that SRPT 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.

To most traders, hedge funds are seen as slow, outdated investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the leaders of this club, about 850 funds. These money managers preside over the lion's share of all hedge funds' total asset base, and by following their finest investments, Insider Monkey has discovered several investment strategies that have historically surpassed Mr. Market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a 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_341400" align="aligncenter" width="399"] Samuel Isaly of OrbiMed Advisors[/caption]

Samuel Isaly Orbimed Advisors

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 trades like this one. 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 analyze the key hedge fund action encompassing Sarepta Therapeutics Inc (NASDAQ:SRPT).

What have hedge funds been doing with Sarepta Therapeutics Inc (NASDAQ:SRPT)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SRPT over the last 18 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Phill Gross and Robert Atchinson's Adage Capital Management has the largest position in Sarepta Therapeutics Inc (NASDAQ:SRPT), worth close to $198.1 million, comprising 0.6% of its total 13F portfolio. The second most bullish fund manager is Avoro Capital Advisors (venBio Select Advisor), led by Behzad Aghazadeh, holding a $155 million position; 5.2% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism include Samuel Isaly's OrbiMed Advisors, Mitchell Blutt's Consonance Capital Management and Stephen DuBois's Camber Capital Management. In terms of the portfolio weights assigned to each position Logos Capital allocated the biggest weight to Sarepta Therapeutics Inc (NASDAQ:SRPT), around 6.97% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, earmarking 6.96 percent of its 13F equity portfolio to SRPT.

Judging by the fact that Sarepta Therapeutics Inc (NASDAQ:SRPT) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of hedge funds that decided to sell off their positions entirely in the third quarter. At the top of the heap, Eric Bannasch's Cadian Capital sold off the largest stake of the 750 funds followed by Insider Monkey, valued at close to $71 million in stock. Steve Cohen's fund, Point72 Asset Management, also cut its stock, about $44.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 9 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Sarepta Therapeutics Inc (NASDAQ:SRPT) but similarly valued. We will take a look at Brookfield Renewable Partners L.P. (NYSE:BEP), E*TRADE Financial Corporation (NASDAQ:ETFC), Dropbox, Inc. (NASDAQ:DBX), and CNH Industrial NV (NYSE:CNHI). All of these stocks' market caps are similar to SRPT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BEP,3,18840,-1 ETFC,37,941990,-11 DBX,44,985316,-2 CNHI,17,156917,1 Average,25.25,525766,-3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $526 million. That figure was $906 million in SRPT's case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand Brookfield Renewable Partners L.P. (NYSE:BEP) is the least popular one with only 3 bullish hedge fund positions. Sarepta Therapeutics Inc (NASDAQ:SRPT) is not the most popular stock in this group but hedge fund interest is still above 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 but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on SRPT as the stock returned 55.7% in Q2 (through the end of May) 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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