Does scPharmaceuticals Inc. (NASDAQ:SCPH) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
scPharmaceuticals Inc. (NASDAQ:SCPH) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of September. 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 LRAD Corp (NASDAQ:LRAD), OneMain Holdings Inc (NYSE:LEAF), and Savara, Inc. (NASDAQ:SVRA) to gather more data points. Our calculations also showed that SCPH 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.
In the 21st century investor’s toolkit there are plenty of indicators stock traders put to use to appraise stocks. Some of the most innovative indicators are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the S&P 500 by a solid margin (see the details here).
[caption id="attachment_341400" align="alignnone" width="600"] Samuel Isaly of OrbiMed Advisors[/caption]
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 as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's take a look at the key hedge fund action surrounding scPharmaceuticals Inc. (NASDAQ:SCPH).
What have hedge funds been doing with scPharmaceuticals Inc. (NASDAQ:SCPH)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SCPH over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Samuel Isaly's OrbiMed Advisors has the biggest position in scPharmaceuticals Inc. (NASDAQ:SCPH), worth close to $20 million, comprising 0.4% of its total 13F portfolio. Coming in second is RA Capital Management, managed by Peter Kolchinsky, which holds a $19.1 million position; 1.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism contain Kamran Moghtaderi's Eversept Partners. Gavin Saitowitz and Cisco J. del Valle's Springbok Capital. In terms of the portfolio weights assigned to each position RA Capital Management allocated the biggest weight to scPharmaceuticals Inc. (NASDAQ:SCPH), around 1.14% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, designating 0.41 percent of its 13F equity portfolio to SCPH.
Since scPharmaceuticals Inc. (NASDAQ:SCPH) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of funds who sold off their entire stakes last quarter. At the top of the heap, Israel Englander's Millennium Management cut the largest stake of the 750 funds followed by Insider Monkey, valued at about $0.1 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund cut about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as scPharmaceuticals Inc. (NASDAQ:SCPH) but similarly valued. These stocks are LRAD Corp (NASDAQ:LRAD), OneMain Holdings Inc (NYSE:LEAF), Savara, Inc. (NASDAQ:SVRA), and Neoleukin Therapeutics, Inc. (NASDAQ:NLTX). All of these stocks' market caps are similar to SCPH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LRAD,6,11989,4 LEAF,8,25548,0 SVRA,10,18395,0 NLTX,9,45869,1 Average,8.25,25450,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $41 million in SCPH's case. Savara, Inc. (NASDAQ:SVRA) is the most popular stock in this table. On the other hand LRAD Corp (NASDAQ:LRAD) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks scPharmaceuticals Inc. (NASDAQ:SCPH) is even less popular than LRAD. Hedge funds dodged a bullet by taking a bearish stance towards SCPH. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SCPH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SCPH investors were disappointed as the stock returned -26.9% 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.