Is SCPH A Good Stock To Buy Now?
Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards scPharmaceuticals Inc. (NASDAQ:SCPH) to find out whether there were any major changes in hedge funds' views.
Is SCPH a good stock to buy now? Prominent investors were getting more bullish. The number of long hedge fund bets moved up by 1 recently. scPharmaceuticals Inc. (NASDAQ:SCPH) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. 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 for a quick look at the top 5 stocks). There were 11 hedge funds in our database with SCPH holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Gavin Saitowitz of Prelude Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a look at the key hedge fund action regarding scPharmaceuticals Inc. (NASDAQ:SCPH).
Do Hedge Funds Think SCPH Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in SCPH a year ago. 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, OrbiMed Advisors held the most valuable stake in scPharmaceuticals Inc. (NASDAQ:SCPH), which was worth $35.7 million at the end of the third quarter. On the second spot was RA Capital Management which amassed $26.2 million worth of shares. Ikarian Capital, Driehaus Capital, and Alyeska 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 Ikarian Capital allocated the biggest weight to scPharmaceuticals Inc. (NASDAQ:SCPH), around 0.8% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, setting aside 0.48 percent of its 13F equity portfolio to SCPH.
As one would reasonably expect, key money managers were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the largest position in scPharmaceuticals Inc. (NASDAQ:SCPH). Two Sigma Advisors had $0.1 million invested in the company at the end of the quarter. Campbell Wilson's Old Well Partners also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).
Let's now review hedge fund activity in other stocks similar to scPharmaceuticals Inc. (NASDAQ:SCPH). We will take a look at PCSB Financial Corporation (NASDAQ:PCSB), Rayonier Advanced Materials Inc (NYSE:RYAM), Park-Ohio Holdings Corp. (NASDAQ:PKOH), Solar Senior Capital Ltd (NASDAQ:SUNS), DZS Inc. (NASDAQ:DZSI), Ceragon Networks Ltd. (NASDAQ:CRNT), and iCAD Inc (NASDAQ:ICAD). This group of stocks' market valuations match SCPH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCSB,11,17872,2 RYAM,10,19326,0 PKOH,6,16550,-2 SUNS,2,1073,0 DZSI,4,10546,-2 CRNT,7,11308,0 ICAD,14,31633,2 Average,7.7,15473,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.7 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $85 million in SCPH's case. iCAD Inc (NASDAQ:ICAD) is the most popular stock in this table. On the other hand Solar Senior Capital Ltd (NASDAQ:SUNS) is the least popular one with only 2 bullish hedge fund positions. scPharmaceuticals Inc. (NASDAQ:SCPH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SCPH is 77.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately SCPH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SCPH were disappointed as the stock returned -30.6% since the end of September (through 12/8) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
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