In this article we will take a look at whether hedge funds think scPharmaceuticals Inc. (NASDAQ:SCPH) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is scPharmaceuticals Inc. (NASDAQ:SCPH) the right investment to pursue these days? Investors who are in the know are taking an optimistic view. The number of long hedge fund positions rose by 1 lately. Our calculations also showed that SCPH 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). SCPH was in 6 hedge funds’ portfolios at the end of March. There were 5 hedge funds in our database with SCPH positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Kamran Moghtaderi of Eversept Partners
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 stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to go over the key hedge fund action encompassing scPharmaceuticals Inc. (NASDAQ:SCPH).
Hedge fund activity in scPharmaceuticals Inc. (NASDAQ:SCPH)
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SCPH over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Peter Kolchinsky’s RA Capital Management has the number one position in scPharmaceuticals Inc. (NASDAQ:SCPH), worth close to $26 million, amounting to 0.8% of its total 13F portfolio. The second most bullish fund manager is OrbiMed Advisors, led by Samuel Isaly, holding a $25.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Neil Shahrestani’s Ikarian Capital, Renaissance Technologies and Kamran Moghtaderi’s Eversept Partners. In terms of the portfolio weights assigned to each position RA Capital Management allocated the biggest weight to scPharmaceuticals Inc. (NASDAQ:SCPH), around 0.82% of its 13F portfolio. Ikarian Capital is also relatively very bullish on the stock, dishing out 0.6 percent of its 13F equity portfolio to SCPH.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Ikarian Capital, managed by Neil Shahrestani, assembled the most valuable position in scPharmaceuticals Inc. (NASDAQ:SCPH). Ikarian Capital had $7.9 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.3 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to scPharmaceuticals Inc. (NASDAQ:SCPH). We will take a look at Alpha Pro Tech, Ltd. (NYSE:APT), Liminal BioSciences Inc. (NASDAQ:LMNL), ESSA Bancorp, Inc. (NASDAQ:ESSA), and Solar Senior Capital Ltd (NASDAQ:SUNS). This group of stocks’ market valuations match SCPH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APT | 5 | 15095 | 3 |
| LMNL | 1 | 21980 | 0 |
| ESSA | 2 | 9991 | -1 |
| SUNS | 3 | 859 | 2 |
| Average | 2.75 | 11981 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $62 million in SCPH’s case. Alpha Pro Tech, Ltd. (NYSE:APT) is the most popular stock in this table. On the other hand Liminal BioSciences Inc. (NASDAQ:LMNL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks scPharmaceuticals Inc. (NASDAQ:SCPH) 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. Unfortunately SCPH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SCPH were disappointed as the stock returned 2.6% during the second quarter (through June 10th) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
