The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) based on those filings.
Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) investors should pay attention to an increase in enthusiasm from smart money lately. Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. There were 3 hedge funds in our database with VRCA holdings at the end of June. Our calculations also showed that VRCA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a gander at the key hedge fund action encompassing Verrica Pharmaceuticals Inc. (NASDAQ:VRCA).
What have hedge funds been doing with Verrica Pharmaceuticals Inc. (NASDAQ:VRCA)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in VRCA a year ago. So, let’s see 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, Joseph Edelman’s Perceptive Advisors has the most valuable position in Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), worth close to $26.4 million, amounting to 0.4% of its total 13F portfolio. On Perceptive Advisors’s heels is OrbiMed Advisors, managed by Samuel Isaly, which holds a $11.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism include Israel Englander’s Millennium Management, David M. Knott’s Dorset Management and . In terms of the portfolio weights assigned to each position Perceptive Advisors allocated the biggest weight to Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), around 0.39% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, earmarking 0.21 percent of its 13F equity portfolio to VRCA.
Consequently, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, assembled the most valuable position in Verrica Pharmaceuticals Inc. (NASDAQ:VRCA). Millennium Management had $2.8 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) but similarly valued. We will take a look at Soleno Therapeutics, Inc. (NASDAQ:SLNO), Hovnanian Enterprises, Inc. (NYSE:HOV), Medicenna Therapeutics Corp. (NASDAQ:MDNA), Norwood Financial Corp. (NASDAQ:NWFL), Protective Insurance Corporation (NASDAQ:PTVCA), DBV Technologies SA (NASDAQ:DBVT), and Calumet Specialty Products Partners, L.P (NASDAQ:CLMT). This group of stocks’ market values are similar to VRCA’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $41 million in VRCA’s case. Soleno Therapeutics, Inc. (NASDAQ:SLNO) is the most popular stock in this table. On the other hand Medicenna Therapeutics Corp. (NASDAQ:MDNA) is the least popular one with only 2 bullish hedge fund positions. Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VRCA is 30.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on VRCA as the stock returned 21.7% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.