Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Sarepta Therapeutics Inc (NASDAQ:SRPT).
Is Sarepta Therapeutics Inc (NASDAQ:SRPT) a bargain? The best stock pickers are taking a bullish view. The number of bullish hedge fund positions rose by 6 in recent months. Our calculations also showed that SRPT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). SRPT was in 42 hedge funds’ portfolios at the end of December. There were 36 hedge funds in our database with SRPT holdings at the end of the previous quarter.
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Brad Farber of Atika Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to take a look at the new hedge fund action surrounding Sarepta Therapeutics Inc (NASDAQ:SRPT).
What have hedge funds been doing with Sarepta Therapeutics Inc (NASDAQ:SRPT)?
At the end of the fourth quarter, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the third quarter of 2019. By comparison, 41 hedge funds held shares or bullish call options in SRPT a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, venBio Select Advisor, managed by Behzad Aghazadeh, holds the most valuable position in Sarepta Therapeutics Inc (NASDAQ:SRPT). venBio Select Advisor has a $227.1 million position in the stock, comprising 6.7% of its 13F portfolio. The second most bullish fund manager is Phill Gross and Robert Atchinson of Adage Capital Management, with a $140.3 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Samuel Isaly’s OrbiMed Advisors, Eli Casdin’s Casdin Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Sarepta Therapeutics Inc (NASDAQ:SRPT), around 14.93% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, earmarking 7.95 percent of its 13F equity portfolio to SRPT.
As one would reasonably expect, some big names have jumped into Sarepta Therapeutics Inc (NASDAQ:SRPT) headfirst. Logos Capital, managed by Arsani William, initiated the most valuable position in Sarepta Therapeutics Inc (NASDAQ:SRPT). Logos Capital had $29.2 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $19.4 million position during the quarter. The other funds with new positions in the stock are Lawrence Kam’s Sonic Capital, Kamran Moghtaderi’s Eversept Partners, and Brad Farber’s Atika Capital.
Let’s also examine hedge fund activity in other stocks similar to Sarepta Therapeutics Inc (NASDAQ:SRPT). We will take a look at DaVita Inc (NYSE:DVA), TechnipFMC plc (NYSE:FTI), Cognex Corporation (NASDAQ:CGNX), and AGNC Investment Corp. (NASDAQ:AGNC). This group of stocks’ market valuations are closest to SRPT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DVA | 38 | 3962351 | 1 |
| FTI | 34 | 862501 | -2 |
| CGNX | 24 | 211987 | 4 |
| AGNC | 21 | 147216 | 3 |
| Average | 29.25 | 1296014 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1296 million. That figure was $1108 million in SRPT’s case. DaVita Inc (NYSE:DVA) is the most popular stock in this table. On the other hand AGNC Investment Corp. (NASDAQ:AGNC) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Sarepta Therapeutics Inc (NASDAQ:SRPT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th and still beat the market by 1.9 percentage points. Unfortunately SRPT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SRPT were disappointed as the stock returned -17.2% during the first two months of 2020 (through March 9th) 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 in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
