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In this article you are going to find out whether hedge funds think Sorrento Therapeutics Inc (NASDAQ:SRNE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is SRNE a good stock to buy now? Sorrento Therapeutics Inc (NASDAQ:SRNE) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 13. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SRNE investors should be aware of an increase in support from the world's most elite money managers of late. There were 12 hedge funds in our database with SRNE holdings at the end of June. Our calculations also showed that SRNE isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Philippe Laffont of Coatue Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a gander at the new hedge fund action encompassing Sorrento Therapeutics Inc (NASDAQ:SRNE).
Do Hedge Funds Think SRNE Is A Good Stock To Buy Now?
At third quarter's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in SRNE a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Cormorant Asset Management held the most valuable stake in Sorrento Therapeutics Inc (NASDAQ:SRNE), which was worth $66.9 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $11.5 million worth of shares. Coatue Management, D E Shaw, and Sabby Capital 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 Sorrento Therapeutics Inc (NASDAQ:SRNE), around 2.57% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, designating 1.01 percent of its 13F equity portfolio to SRNE.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Sabby Capital, managed by Hal Mintz, established the most valuable position in Sorrento Therapeutics Inc (NASDAQ:SRNE). Sabby Capital had $6.8 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Lee Ainslie's Maverick Capital, Andre F. Perold's HighVista Strategies, and Renee Yao's Neo Ivy Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Sorrento Therapeutics Inc (NASDAQ:SRNE) but similarly valued. These stocks are NCR Corporation (NYSE:NCR), Cogent Communications Holdings Inc. (NASDAQ:CCOI), TechnipFMC plc (NYSE:FTI), Sabra Health Care REIT Inc (NASDAQ:SBRA), Acacia Communications, Inc. (NASDAQ:ACIA), Stitch Fix, Inc. (NASDAQ:SFIX), and Equinox Gold Corp. (NYSE:EQX). This group of stocks' market valuations are similar to SRNE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NCR,32,309659,0 CCOI,28,385884,0 FTI,31,549277,0 SBRA,24,156798,6 ACIA,32,1045851,-2 SFIX,25,235359,-3 EQX,16,94590,2 Average,26.9,396774,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $397 million. That figure was $101 million in SRNE's case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand Equinox Gold Corp. (NYSE:EQX) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Sorrento Therapeutics Inc (NASDAQ:SRNE) is even less popular than EQX. Our overall hedge fund sentiment score for SRNE is 36. 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. Hedge funds dodged a bullet by taking a bearish stance towards SRNE. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th but managed to beat the market again by 16.2 percentage points. Unfortunately SRNE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SRNE investors were disappointed as the stock returned -29.1% since the end of the third quarter (through 12/8) 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 most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.