Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Processa Pharmaceuticals, Inc. (NASDAQ:PCSA).
Is PCSA a good stock to buy? Processa Pharmaceuticals, Inc. (NASDAQ:PCSA) shareholders have witnessed an increase in support from the world’s most elite money managers of late. Processa Pharmaceuticals, Inc. (NASDAQ:PCSA) was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 2. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 2 hedge funds in our database with PCSA holdings at the end of December. Our calculations also showed that PCSA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 let’s take a gander at the recent hedge fund action regarding Processa Pharmaceuticals, Inc. (NASDAQ:PCSA).
Do Hedge Funds Think PCSA Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in PCSA a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Orin Hirschman’s AIGH Investment Partners has the largest position in Processa Pharmaceuticals, Inc. (NASDAQ:PCSA), worth close to $4 million, accounting for 0.8% of its total 13F portfolio. The second largest stake is held by Frederick Tucker Golden of Solas Capital Management, with a $2.2 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Solas Capital Management allocated the biggest weight to Processa Pharmaceuticals, Inc. (NASDAQ:PCSA), around 1.83% of its 13F portfolio. AIGH Investment Partners is also relatively very bullish on the stock, dishing out 0.84 percent of its 13F equity portfolio to PCSA.
As aggregate interest increased, key money managers have been driving this bullishness. AIGH Investment Partners, managed by Orin Hirschman, assembled the largest position in Processa Pharmaceuticals, Inc. (NASDAQ:PCSA). AIGH Investment Partners had $4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.1 million position during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Processa Pharmaceuticals, Inc. (NASDAQ:PCSA) but similarly valued. These stocks are Ocean Power Technologies Inc (NASDAQ:OPTT), InflaRx N.V. (NASDAQ:IFRX), Gain Therapeutics, Inc. (NASDAQ:GANX), ImmunoPrecise Antibodies Ltd. (NASDAQ:IPA), First Northwest Bancorp (NASDAQ:FNWB), USA Truck, Inc. (NASDAQ:USAK), and Amtech Systems, Inc. (NASDAQ:ASYS). This group of stocks’ market values are similar to PCSA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OPTT | 2 | 59 | 0 |
| IFRX | 17 | 42737 | 10 |
| GANX | 5 | 13575 | 5 |
| IPA | 1 | 1472 | 1 |
| FNWB | 2 | 18108 | 0 |
| USAK | 3 | 4627 | -3 |
| ASYS | 12 | 21388 | 5 |
| Average | 6 | 14567 | 2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $7 million in PCSA’s case. InflaRx N.V. (NASDAQ:IFRX) is the most popular stock in this table. On the other hand ImmunoPrecise Antibodies Ltd. (NASDAQ:IPA) is the least popular one with only 1 bullish hedge fund positions. Processa Pharmaceuticals, Inc. (NASDAQ:PCSA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PCSA is 46.4. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately PCSA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PCSA investors were disappointed as the stock returned -37% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.