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 at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Solid Biosciences Inc. (NASDAQ:SLDB) and determine whether the smart money was really smart about this stock.
Hedge fund interest in Solid Biosciences Inc. (NASDAQ:SLDB) 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 Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Community Bankers Trust Corp. (NASDAQ:ESXB), and Resolute Forest Products Inc (NYSE:RFP) to gather more data points. Our calculations also showed that SLDB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the latest hedge fund action encompassing Solid Biosciences Inc. (NASDAQ:SLDB).
How have hedgies been trading Solid Biosciences Inc. (NASDAQ:SLDB)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in SLDB a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Perceptive Advisors, managed by Joseph Edelman, holds the biggest position in Solid Biosciences Inc. (NASDAQ:SLDB). Perceptive Advisors has a $16.1 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Peter Kolchinsky of RA Capital Management, with a $10.9 million position; 0.3% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism encompass Neil Shahrestani’s Ikarian Capital, and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Perceptive Advisors allocated the biggest weight to Solid Biosciences Inc. (NASDAQ:SLDB), around 0.42% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, earmarking 0.35 percent of its 13F equity portfolio to SLDB.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Burrage Capital 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 Ikarian Capital).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Solid Biosciences Inc. (NASDAQ:SLDB) but similarly valued. These stocks are Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Community Bankers Trust Corp. (NASDAQ:ESXB), Resolute Forest Products Inc (NYSE:RFP), and Genasys Inc. (NASDAQ:GNSS). 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|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $31 million in SLDB’s case. Resolute Forest Products Inc (NYSE:RFP) is the most popular stock in this table. On the other hand Genasys Inc. (NASDAQ:GNSS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Solid Biosciences Inc. (NASDAQ:SLDB) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on SLDB, though not to the same extent, as the stock returned 22.6% in Q2 and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.