Is Sucampo Pharmaceuticals, Inc. (SCMP) Going to Burn These Hedge Funds?

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) shareholders have witnessed an increase in hedge fund sentiment recently. SCMP was in 21 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with SCMP positions at the end of the previous quarter. At the end of this article we will also compare SCMP to other stocks including QLogic Corporation (NASDAQ:QLGC), MTS Systems Corporation (NASDAQ:MTSC), and Gener8 Maritime Inc (NYSE:GNRT) to get a better sense of its popularity.

Keeping this in mind, we’re going to take a glance at the new action surrounding Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP).

How are hedge funds trading Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP)?

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP). Renaissance Technologies has a $8.8 million position in the stock, comprising less than 0.1% of its 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $4.4 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other peers with similar optimism encompass John Overdeck and David Siegel’s Two Sigma Advisors, Israel Englander’s Millennium Management and Peter Muller’s PDT Partners.

Consequently, key money managers were breaking ground themselves. HBK Investments, managed by David Costen Haley, assembled the most valuable position in Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP). HBK Investments had $3.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Glenn Russell Dubin’s Highbridge Capital Management, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP). We will take a look at QLogic Corporation (NASDAQ:QLGC), MTS Systems Corporation (NASDAQ:MTSC), Gener8 Maritime Inc (NYSE:GNRT), and Atara Biotherapeutics Inc (NASDAQ:ATRA). This group of stocks’ market values are closest to SCMP’s market value.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $257 million. That figure was $48 million in SCMP’s case. QLogic Corporation (NASDAQ:QLGC) is the most popular stock in this table. On the other hand Atara Biotherapeutics Inc (NASDAQ:ATRA) is the least popular one with only 11 bullish hedge fund positions. Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) 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 QLGC might be a better candidate to consider a long position.