Hedge Funds Are Crazy About pSivida Corp. (PSDV)

The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards pSivida Corp. (NASDAQ:PSDV) and see how it was affected.

pSivida Corp. (NASDAQ:PSDV) was in 8 hedge funds’ portfolios at the end of September. pSivida Corp. (NASDAQ:PSDV) has experienced an increase in hedge fund interest in recent months. There were 7 hedge funds in our database with pSivida Corp. (NASDAQ:PSDV) positions at the end of the previous quarter. 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 Rocky Brands, Inc. (NASDAQ:RCKY), Triangle Petroleum Corporation (NYSEMKT:TPLM), and Riverview Bancorp, Inc. (NASDAQ:RVSB) to gather more data points.

In the financial world, there are dozens of formulas stock market investors can use to appraise stocks. A couple of the most innovative formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can trounce the market by a solid margin (see the details here).

Now, we’re going to take a gander at the new action surrounding pSivida Corp. (NASDAQ:PSDV).

How are hedge funds trading pSivida Corp. (NASDAQ:PSDV)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 14% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Thomas Ellis and Todd Hammer’s North Run Capital has the most valuable position in pSivida Corp. (NASDAQ:PSDV), worth close to $7.8 million, amounting to 0.8% of its total 13F portfolio. The second largest stake is held by James E. Flynn of Deerfield Management, with a $3.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. The remaining members of the smart money with similar optimism encompass Renaissance Technologies, Joseph Edelman’s Perceptive Advisors, and Peter Muller’s PDT Partners.

As aggregate interest increased, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, established the largest position in pSivida Corp. (NASDAQ:PSDV). Millennium Management had $0.1 million invested in the company at the end of the quarter. Ken Fisher’s Fisher Asset Management also made a $44,000 investment in the stock during the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as pSivida Corp. (NASDAQ:PSDV) but similarly valued. These stocks are Rocky Brands, Inc. (NASDAQ:RCKY), Triangle Petroleum Corporation (NYSEMKT:TPLM), Riverview Bancorp, Inc. (NASDAQ:RVSB), and A. H. Belo Corporation (NYSE:AHC). This group of stocks’ market caps is similar to pSivida Corp. (NASDAQ:PSDV)’s market cap.

As you can see, these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $13 million in pSivida Corp. (NASDAQ:PSDV)’s case. Triangle Petroleum Corporation (NYSEMKT:TPLM) is the most popular stock in this table. On the other hand, Rocky Brands, Inc. (NASDAQ:RCKY) is the least popular one with only 4 bullish hedge fund positions. pSivida Corp. (NASDAQ:PSDV) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Triangle Petroleum Corporation (NYSEMKT:TPLM) might be a better candidate to consider a long position.