Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Prothena Corporation plc (NASDAQ:PRTA) based on that data.
Prothena Corporation plc (NASDAQ:PRTA) was in 20 hedge funds' portfolios at the end of the first quarter of 2020. PRTA investors should pay attention to a decrease in hedge fund interest lately. There were 23 hedge funds in our database with PRTA holdings at the end of the previous quarter. Our calculations also showed that PRTA 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_256989" align="aligncenter" width="400"] Dmitry Balyasny of Balyasny Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's review the new hedge fund action regarding Prothena Corporation plc (NASDAQ:PRTA).
How have hedgies been trading Prothena Corporation plc (NASDAQ:PRTA)?
Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PRTA over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, EcoR1 Capital held the most valuable stake in Prothena Corporation plc (NASDAQ:PRTA), which was worth $100.9 million at the end of the third quarter. On the second spot was OrbiMed Advisors which amassed $31.1 million worth of shares. Great Point Partners, Palo Alto Investors, and Citadel Investment Group 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 EcoR1 Capital allocated the biggest weight to Prothena Corporation plc (NASDAQ:PRTA), around 10.54% of its 13F portfolio. Lonestar Capital Management is also relatively very bullish on the stock, earmarking 3.67 percent of its 13F equity portfolio to PRTA.
Seeing as Prothena Corporation plc (NASDAQ:PRTA) has faced a decline in interest from the smart money, logic holds that there lies a certain "tier" of funds that slashed their positions entirely in the first quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management sold off the largest position of the "upper crust" of funds followed by Insider Monkey, totaling close to $1.9 million in stock. Neil Shahrestani's fund, Ikarian Capital, also dumped its stock, about $0.5 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds in the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Prothena Corporation plc (NASDAQ:PRTA) but similarly valued. These stocks are Midland States Bancorp, Inc. (NASDAQ:MSBI), Boston Omaha Corporation (NASDAQ:BOMN), CEL-SCI Corporation (NYSE:CVM), and Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA). All of these stocks' market caps are closest to PRTA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSBI,8,5655,-1 BOMN,5,185342,0 CVM,5,10816,0 LOMA,12,30637,5 Average,7.5,58113,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $215 million in PRTA's case. Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) is the most popular stock in this table. On the other hand Boston Omaha Corporation (NASDAQ:BOMN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Prothena Corporation plc (NASDAQ:PRTA) 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. Unfortunately PRTA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on PRTA were disappointed as the stock returned -7.3% during the second quarter (through June 17th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.