It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP).
Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) was in 14 hedge funds’ portfolios at the end of September. SCMP investors should be aware of a decrease in support from the world’s most successful money managers recently. 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 PGT, Inc. (NASDAQ:PGTI), Chromcraft Revington, Inc. (NYSEAMEX:CRC), and Ennis, Inc. (NYSE:EBF) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How have hedgies been trading Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP)?
Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 7% drop from the second quarter of 2016. On the other hand, there were a total of 22 hedge funds with a bullish position in SCMP at the beginning of this year, hedge fund ownership has fallen even more sharply in 2016. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jim Simons’ Renaissance Technologies has the number one position in Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP), worth close to $16.7 million. Sitting at the No. 2 spot is Millennium Management, founded by Israel Englander, which holds an $8.1 million position. Remaining hedge funds and institutional investors with similar optimism encompass Chuck Royce’s Royce & Associates, Robert B. Gillam’s McKinley Capital Management, and Steve Cohen’s Point72 Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Seeing as Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) has weathered a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds who were dropping their positions entirely in the third quarter. At the top of the heap, Neil Chriss’ Hutchin Hill Capital dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $1.1 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $0.4 million worth of shares.
Let’s check out hedge fund activity in other stocks similar to Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP). These stocks are PGT, Inc. (NASDAQ:PGTI), Chromcraft Revington, Inc. (NYSEAMEX:CRC), Ennis, Inc. (NYSE:EBF), and Momo Inc (ADR) (NASDAQ:MOMO). All of these stocks’ market caps match SCMP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $41 million in SCMP’s case. Chromcraft Revington, Inc. (NYSEAMEX:CRC) is the most popular stock in this table. On the other hand Ennis, Inc. (NYSE:EBF) is the least popular one with only 13 bullish hedge fund positions. Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CRC might be a better candidate to consider taking a long position in.