We can judge whether Stoke Therapeutics, Inc. (NASDAQ:STOK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Stoke Therapeutics, Inc. (NASDAQ:STOK) has seen a decrease in hedge fund sentiment recently. Our calculations also showed that STOK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Peter Kolchinsky of RA Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a peek at the recent hedge fund action regarding Stoke Therapeutics, Inc. (NASDAQ:STOK).
What does smart money think about Stoke Therapeutics, Inc. (NASDAQ:STOK)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -44% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in STOK a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Stoke Therapeutics, Inc. (NASDAQ:STOK) was held by Cormorant Asset Management, which reported holding $38.4 million worth of stock at the end of September. It was followed by RA Capital Management with a $24.1 million position. Other investors bullish on the company included Redmile Group, Millennium Management, and Perceptive Advisors. In terms of the portfolio weights assigned to each position Cormorant Asset Management allocated the biggest weight to Stoke Therapeutics, Inc. (NASDAQ:STOK), around 2.34% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, designating 1.43 percent of its 13F equity portfolio to STOK.
Seeing as Stoke Therapeutics, Inc. (NASDAQ:STOK) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Samuel Isaly’s OrbiMed Advisors cut the largest investment of the 750 funds tracked by Insider Monkey, comprising about $3.8 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dropped its stock, about $2.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 8 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Stoke Therapeutics, Inc. (NASDAQ:STOK). These stocks are U.S. Silica Holdings Inc (NYSE:SLCA), JinkoSolar Holding Co., Ltd. (NYSE:JKS), NextCure, Inc. (NASDAQ:NXTC), and Astec Industries, Inc. (NASDAQ:ASTE). All of these stocks’ market caps are similar to STOK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SLCA | 16 | 198147 | -1 |
| JKS | 6 | 14103 | -2 |
| NXTC | 8 | 189131 | 0 |
| ASTE | 13 | 83531 | 2 |
| Average | 10.75 | 121228 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $118 million in STOK’s case. U.S. Silica Holdings Inc (NYSE:SLCA) is the most popular stock in this table. On the other hand JinkoSolar Holding Co., Ltd. (NYSE:JKS) is the least popular one with only 6 bullish hedge fund positions. Stoke Therapeutics, Inc. (NASDAQ:STOK) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on STOK as the stock returned 14% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
