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Were These Hedge Funds Right About Buying Prothena Corporation plc (PRTA)?

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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 second 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 6 years and analyze what the smart money thinks of Prothena Corporation plc (NASDAQ:PRTA) based on that data.

Is Prothena Corporation plc (NASDAQ:PRTA) a buy, sell, or hold? Hedge funds were becoming hopeful. The number of long hedge fund positions advanced by 3 lately. Prothena Corporation plc (NASDAQ:PRTA) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistic is 25. Our calculations also showed that PRTA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 17 hedge funds in our database with PRTA positions at the end of the first quarter.

At the moment there are numerous tools stock market investors employ to value stocks. A couple of the less known tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace the broader indices by a significant margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Oleg Nodelman EcoR1 Capital
Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to go over the fresh hedge fund action encompassing Prothena Corporation plc (NASDAQ:PRTA).

Do Hedge Funds Think PRTA Is A Good Stock To Buy Now?

At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PRTA over the last 24 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PRTA A Good Stock To Buy?
Is PRTA A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, EcoR1 Capital, managed by Oleg Nodelman, holds the largest position in Prothena Corporation plc (NASDAQ:PRTA). EcoR1 Capital has a $580.1 million position in the stock, comprising 21.7% of its 13F portfolio. Sitting at the No. 2 spot is Palo Alto Investors, which holds a $89 million position; the fund has 4.9% of its 13F portfolio invested in the stock. Other peers that hold long positions encompass Jeremy Green's Redmile Group, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Prothena Corporation plc (NASDAQ:PRTA), around 21.68% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, dishing out 13.57 percent of its 13F equity portfolio to PRTA.

Consequently, key money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the largest position in Prothena Corporation plc (NASDAQ:PRTA). Adage Capital Management had $10.3 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $8.7 million investment in the stock during the quarter. The following funds were also among the new PRTA investors: Joseph Edelman's Perceptive Advisors, Paul Tudor Jones's Tudor Investment Corp, and Matthew Strobeck's Birchview Capital.

Let's check out hedge fund activity in other stocks similar to Prothena Corporation plc (NASDAQ:PRTA). These stocks are Telos Corporation (NASDAQ:TLS), First Midwest Bancorp Inc (NASDAQ:FMBI), First Merchants Corporation (NASDAQ:FRME), Belden Inc. (NYSE:BDC), Dream Finders Homes, Inc. (NASDAQ:DFH), American Assets Trust, Inc (NYSE:AAT), and Renasant Corporation (NASDAQ:RNST). All of these stocks' market caps resemble PRTA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TLS,19,228954,4 FMBI,17,107837,4 FRME,12,118179,1 BDC,15,172473,-2 DFH,7,54133,-3 AAT,10,20140,-2 RNST,9,7016,2 Average,12.7,101247,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $888 million in PRTA's case. Telos Corporation (NASDAQ:TLS) is the most popular stock in this table. On the other hand Dream Finders Homes, Inc. (NASDAQ:DFH) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Prothena Corporation plc (NASDAQ:PRTA) is more popular among hedge funds. Our overall hedge fund sentiment score for PRTA is 82. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 through November 5th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on PRTA as the stock returned 14.6% since the end of June (through 11/5) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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