Hedge Funds Are Dumping Sorrento Therapeutics Inc (SRNE)

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Sorrento Therapeutics Inc (NASDAQ:SRNE), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Sorrento Therapeutics Inc (NASDAQ:SRNE) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. Sorrento Therapeutics Inc (NASDAQ:SRNE) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 14. Our calculations also showed that SRNE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Israel Englander of Millennium Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s check out the latest hedge fund action encompassing Sorrento Therapeutics Inc (NASDAQ:SRNE).

Do Hedge Funds Think SRNE Is A Good Stock To Buy Now?

At second quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in SRNE a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

More specifically, D E Shaw was the largest shareholder of Sorrento Therapeutics Inc (NASDAQ:SRNE), with a stake worth $17.5 million reported as of the end of June. Trailing D E Shaw was Sabby Capital, which amassed a stake valued at $11.6 million. Citadel Investment Group, Cormorant Asset Management, 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 Sabby Capital allocated the biggest weight to Sorrento Therapeutics Inc (NASDAQ:SRNE), around 1.64% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, designating 0.16 percent of its 13F equity portfolio to SRNE.

Because Sorrento Therapeutics Inc (NASDAQ:SRNE) has faced declining sentiment from hedge fund managers, we can see that there were a few fund managers that slashed their full holdings heading into Q3. Interestingly, Neil Shahrestani’s Ikarian Capital said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, valued at about $1.4 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund cut about $1.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 4 funds heading into Q3.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Sorrento Therapeutics Inc (NASDAQ:SRNE) but similarly valued. We will take a look at Noah Holdings Limited (NYSE:NOAH), Albany International Corp. (NYSE:AIN), CryoPort, Inc. (NASDAQ:CYRX), Yalla Group Limited (NYSE:YALA), FuelCell Energy, Inc. (NASDAQ:FCEL), Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), and Maxar Technologies Inc (NYSE:MAXR). This group of stocks’ market valuations match SRNE’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $39 million in SRNE’s case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand Yalla Group Limited (NYSE:YALA) is the least popular one with only 6 bullish hedge fund positions. Sorrento Therapeutics Inc (NASDAQ:SRNE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SRNE is 32. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately SRNE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SRNE investors were disappointed as the stock returned -16% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.