Is Solid Biosciences Inc. (SLDB) Going to Burn These Hedge Funds?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Solid Biosciences Inc. (NASDAQ:SLDB).

Solid Biosciences Inc. (NASDAQ:SLDB) has experienced an increase in support from the world’s most elite money managers recently. Our calculations also showed that SLDB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
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.

Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 Capital

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. We’re going to take a glance at the fresh hedge fund action regarding Solid Biosciences Inc. (NASDAQ:SLDB).

How are hedge funds trading Solid Biosciences Inc. (NASDAQ:SLDB)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SLDB over the last 17 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Solid Biosciences Inc. (NASDAQ:SLDB) was held by Perceptive Advisors, which reported holding $69.8 million worth of stock at the end of September. It was followed by RA Capital Management with a $47.3 million position. Other investors bullish on the company included EcoR1 Capital, Millennium Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Solid Biosciences Inc. (NASDAQ:SLDB), around 4.36% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, setting aside 2.82 percent of its 13F equity portfolio to SLDB.

As industrywide interest jumped, key money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in Solid Biosciences Inc. (NASDAQ:SLDB). Adage Capital Management had $5.1 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Nick Thakore’s Diametric Capital and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks similar to Solid Biosciences Inc. (NASDAQ:SLDB). We will take a look at Gran Tierra Energy Inc. (NYSE:GTE), Shoe Carnival, Inc. (NASDAQ:SCVL), Entercom Communications Corp. (NYSE:ETM), and Merchants Bancorp (NASDAQ:MBIN). This group of stocks’ market caps are closest to SLDB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GTE 13 159882 0
SCVL 15 101523 1
ETM 18 46488 -1
MBIN 8 8102 2
Average 13.5 78999 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $172 million in SLDB’s case. Entercom Communications Corp. (NYSE:ETM) is the most popular stock in this table. On the other hand Merchants Bancorp (NASDAQ:MBIN) is the least popular one with only 8 bullish hedge fund positions. Solid Biosciences Inc. (NASDAQ:SLDB) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 SLDB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SLDB investors were disappointed as the stock returned -62% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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