Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Sarepta Therapeutics Inc (NASDAQ:SRPT).
Is Sarepta Therapeutics Inc (NASDAQ:SRPT) a sound stock to buy now? Prominent investors were in a pessimistic mood. The number of long hedge fund positions retreated by 4 in recent months. Sarepta Therapeutics Inc (NASDAQ:SRPT) was in 33 hedge funds’ portfolios at the end of March. The all time high for this statistic is 48. Our calculations also showed that SRPT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.
Felix Baker of Baker Bros.
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. Now let’s go over the latest hedge fund action surrounding Sarepta Therapeutics Inc (NASDAQ:SRPT).
Do Hedge Funds Think SRPT Is A Good Stock To Buy Now?
At the end of March, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SRPT over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of Sarepta Therapeutics Inc (NASDAQ:SRPT), with a stake worth $160.2 million reported as of the end of March. Trailing Avoro Capital Advisors (venBio Select Advisor) was ARK Investment Management, which amassed a stake valued at $138.6 million. Casdin Capital, Marshall Wace LLP, 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 Avoro Capital Advisors (venBio Select Advisor) allocated the biggest weight to Sarepta Therapeutics Inc (NASDAQ:SRPT), around 2.77% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, earmarking 1.22 percent of its 13F equity portfolio to SRPT.
Because Sarepta Therapeutics Inc (NASDAQ:SRPT) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their entire stakes heading into Q2. At the top of the heap, Stephen DuBois’s Camber Capital Management dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, valued at about $68.2 million in stock. Xiuping Li’s fund, Opti Capital Management, also cut its stock, about $68 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 4 funds heading into Q2.
Let’s also examine hedge fund activity in other stocks similar to Sarepta Therapeutics Inc (NASDAQ:SRPT). We will take a look at Duck Creek Technologies, Inc. (NASDAQ:DCT), First Industrial Realty Trust, Inc. (NYSE:FR), Louisiana-Pacific Corporation (NYSE:LPX), Colfax Corporation (NYSE:CFX), New York Community Bancorp, Inc. (NYSE:NYCB), MSA Safety Incorporated (NYSE:MSA), and Medpace Holdings, Inc. (NASDAQ:MEDP). All of these stocks’ market caps are similar to SRPT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DCT | 19 | 310721 | -3 |
| FR | 20 | 416925 | -6 |
| LPX | 30 | 771996 | -11 |
| CFX | 49 | 1009256 | 13 |
| NYCB | 25 | 329163 | 0 |
| MSA | 17 | 29716 | 4 |
| MEDP | 21 | 265560 | -4 |
| Average | 25.9 | 447620 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $448 million. That figure was $527 million in SRPT’s case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand MSA Safety Incorporated (NYSE:MSA) is the least popular one with only 17 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 overall hedge fund sentiment score for SRPT is 46.6. 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 positive signal but 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately SRPT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SRPT were disappointed as the stock returned 1% since the end of March (through 7/2) 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 many of these stocks already outperformed the market since 2019.
Follow Sarepta Therapeutics Inc. (NASDAQ:SRPT)
Follow Sarepta Therapeutics Inc. (NASDAQ:SRPT)
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Disclosure: None. This article was originally published at Insider Monkey.
