Is Sarepta Therapeutics Inc (SRPT) A Good Stock To Buy?

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Sarepta Therapeutics Inc (NASDAQ:SRPT), and what that likely means for the prospects of the company and its stock.

Is Sarepta Therapeutics Inc (NASDAQ:SRPT) a good stock to buy? The world’s most elite money managers sent a green light during the third quarter by increasing their bets on the company. Obviously an increase in overall hedge fund interest isn’t usually a strong sign if the level of hedge fund interest is low compared to its peers. That’s why at the end of this article we will also compare SRPT to other stocks including Scholastic Corp (NASDAQ:SCHL), Caleres Inc (NYSE:CAL), and FibroGen Inc (NASDAQ:FGEN) to get a better sense of its popularity.

If you’d ask most stock holders, hedge funds are assumed to be worthless, old investment vehicles of yesteryear. While there are more than 8000 funds in operation at the moment, Our experts look at the masters of this club, approximately 700 funds. These hedge fund managers administer the majority of the hedge fund industry’s total asset base, and by following their first-class investments, Insider Monkey has found a few investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, we’re going to take a glance at the latest action regarding Sarepta Therapeutics Inc (NASDAQ:SRPT).

Hedge fund activity in Sarepta Therapeutics Inc (NASDAQ:SRPT)

At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 43% from one quarter earlier. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Joseph Edelman’s Perceptive Advisors has the number one position in Sarepta Therapeutics Inc (NASDAQ:SRPT), worth close to $89.4 million, corresponding to 7.1% of its total 13F portfolio. On Perceptive Advisors’s heels is D E Shaw, led by D. E. Shaw, holding a $34.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish comprise Ken Griffin’s Citadel Investment Group, Steve Cohen’s Point72 Asset Management and Hal Mintz’s Sabby Capital.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. venBio Select Advisor, managed by Behzad Aghazadeh, initiated the biggest position in Sarepta Therapeutics Inc (NASDAQ:SRPT). venBio Select Advisor had $15.1 million invested in the company at the end of the quarter. Mark Kingdon’s Kingdon Capital also initiated a $3.2 million position during the quarter. The other funds with brand new SRPT positions are  John Overdeck and David Siegel’s Two Sigma Advisors and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sarepta Therapeutics Inc (NASDAQ:SRPT) but similarly valued. These stocks are Scholastic Corp (NASDAQ:SCHL), Caleres Inc (NYSE:CAL), FibroGen Inc (NASDAQ:FGEN), and Halyard Health Inc (NYSE:HYH). This group of stocks’ market caps resemble SRPT’s market cap.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $307 million in SRPT’s case. Scholastic Corp (NASDAQ:SCHL) is the most popular stock in this table. On the other hand FibroGen Inc (NASDAQ:FGEN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Sarepta Therapeutics Inc (NASDAQ:SRPT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.