Do Hedge Funds Love Prothena Corporation plc (PRTA)?

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 Prothena Corporation plc (NASDAQ:PRTA).

Prothena Corporation plc (NASDAQ:PRTA) was in 20 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 25. PRTA shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 17 hedge funds in our database with PRTA holdings at the end of March. Our calculations also showed that PRTA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, 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. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Prothena Corporation plc (NASDAQ:PRTA).

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

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PRTA over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Oleg Nodelman’s EcoR1 Capital has the largest position in Prothena Corporation plc (NASDAQ:PRTA), worth close to $580.1 million, accounting for 21.7% of its total 13F portfolio. On EcoR1 Capital’s heels is Palo Alto Investors, which holds a $89 million position; the fund has 4.9% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include 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, setting aside 13.57 percent of its 13F equity portfolio to PRTA.

As industrywide interest jumped, key money managers were leading the bulls’ herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the most outsized 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 initiated a $8.7 million position during the quarter. The other funds with new positions in the stock are Joseph Edelman’s Perceptive Advisors, Paul Tudor Jones’s Tudor Investment Corp, and Matthew Strobeck’s Birchview Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Prothena Corporation plc (NASDAQ:PRTA) but similarly valued. 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). This group of stocks’ market valuations are similar to PRTA’s market valuation.

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 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on PRTA as the stock returned 19.8% since the end of June (through 10/22) 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.

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