The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Sierra Oncology, Inc. (NASDAQ:SRRA) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Hedge fund interest in Sierra Oncology, Inc. (NASDAQ:SRRA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hornbeck Offshore Services, Inc. (NYSE:HOS), Chesapeake Granite Wash Trust (NYSE:CHKR), and Leap Therapeutics, Inc. (NASDAQ:LPTX) to gather more data points. Our calculations also showed that SRRA 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.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Nathaniel August of Mangrove Partners
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 check out the new hedge fund action surrounding Sierra Oncology, Inc. (NASDAQ:SRRA).
What does smart money think about Sierra Oncology, Inc. (NASDAQ:SRRA)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SRRA over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Frazier Healthcare Partners was the largest shareholder of Sierra Oncology, Inc. (NASDAQ:SRRA), with a stake worth $3.2 million reported as of the end of September. Trailing Frazier Healthcare Partners was Mangrove Partners, which amassed a stake valued at $1.4 million. 683 Capital Partners, Perceptive Advisors, and Renaissance Technologies 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 Frazier Healthcare Partners allocated the biggest weight to Sierra Oncology, Inc. (NASDAQ:SRRA), around 0.99% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, dishing out 0.51 percent of its 13F equity portfolio to SRRA.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Sectoral Asset Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Winton Capital Management).
Let’s now take a look at hedge fund activity in other stocks similar to Sierra Oncology, Inc. (NASDAQ:SRRA). These stocks are Hornbeck Offshore Services, Inc. (NYSE:HOS), Chesapeake Granite Wash Trust (NYSE:CHKR), Leap Therapeutics, Inc. (NASDAQ:LPTX), and Unique Fabricating Inc (NYSE:UFAB). All of these stocks’ market caps are similar to SRRA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HOS | 13 | 10806 | 0 |
| CHKR | 2 | 19 | 0 |
| LPTX | 2 | 1321 | 0 |
| UFAB | 2 | 1861 | -1 |
| Average | 4.75 | 3502 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $11 million in SRRA’s case. Hornbeck Offshore Services, Inc. (NYSE:HOS) is the most popular stock in this table. On the other hand Chesapeake Granite Wash Trust (NYSE:CHKR) is the least popular one with only 2 bullish hedge fund positions. Sierra Oncology, Inc. (NASDAQ:SRRA) is not the most popular stock in this group but hedge fund interest is still above average. 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 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. Unfortunately SRRA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SRRA were disappointed as the stock returned -11.3% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
