Is Sorrentto Therapeutics Inc (NASDAQ:SRNE) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Sorrentto Therapeutics Inc (NASDAQ:SRNE) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Petmed Express Inc (NASDAQ:PETS), Beazer Homes USA, Inc. (NYSE:BZH), and StarTek, Inc. (NYSE:SRT) to gather more data points. Our calculations also showed that SRNE isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are several gauges shareholders employ to value publicly traded companies. Two of the most innovative gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top money managers can outclass their index-focused peers by a healthy amount (see the details here).
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now, we're going to take a peek at the recent hedge fund action regarding Sorrentto Therapeutics Inc (NASDAQ:SRNE).
How are hedge funds trading Sorrentto Therapeutics Inc (NASDAQ:SRNE)?
At Q2's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in SRNE a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Deerfield Management held the most valuable stake in Sorrentto Therapeutics Inc (NASDAQ:SRNE), which was worth $5.6 million at the end of the second quarter. On the second spot was Hudson Bay Capital Management which amassed $1.8 million worth of shares. Moreover, Wildcat Capital Management, Citadel Investment Group, and Millennium Management were also bullish on Sorrentto Therapeutics Inc (NASDAQ:SRNE), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Sorrentto Therapeutics Inc (NASDAQ:SRNE) has witnessed declining sentiment from hedge fund managers, we can see that there were a few hedge funds who were dropping their positions entirely by the end of the second quarter. It's worth mentioning that D. E. Shaw's D E Shaw cut the largest stake of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $0.3 million in call options, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dumped about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Sorrentto Therapeutics Inc (NASDAQ:SRNE) but similarly valued. These stocks are Petmed Express Inc (NASDAQ:PETS), Beazer Homes USA, Inc. (NYSE:BZH), StarTek, Inc. (NYSE:SRT), and Investors Title Company (NASDAQ:ITIC). This group of stocks' market values are closest to SRNE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PETS,17,67787,1 BZH,7,25276,-2 SRT,3,8110,-4 ITIC,3,39506,-1 Average,7.5,35170,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $10 million in SRNE's case. Petmed Express Inc (NASDAQ:PETS) is the most popular stock in this table. On the other hand StarTek, Inc. (NYSE:SRT) is the least popular one with only 3 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. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SRNE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SRNE investors were disappointed as the stock returned -19.9% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.