Does Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) has seen a decrease in enthusiasm from smart money in recent months. VRCA was in 3 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with VRCA holdings at the end of the previous quarter. Our calculations also showed that VRCA isn’t among the 30 most popular stocks among hedge funds.
According to most traders, hedge funds are perceived as worthless, old investment vehicles of the past. While there are greater than 8000 funds in operation at the moment, We choose to focus on the aristocrats of this group, about 750 funds. These hedge fund managers direct most of the smart money’s total capital, and by observing their first-class stock picks, Insider Monkey has determined various investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Samuel Isaly of OrbiMed Advisors
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the fresh hedge fund action regarding Verrica Pharmaceuticals Inc. (NASDAQ:VRCA).
What does smart money think about Verrica Pharmaceuticals Inc. (NASDAQ:VRCA)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRCA over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Perceptive Advisors was the largest shareholder of Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), with a stake worth $50.3 million reported as of the end of September. Trailing Perceptive Advisors was OrbiMed Advisors, which amassed a stake valued at $21.8 million. Dorset Management was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Perceptive Advisors allocated the biggest weight to Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), around 1.36% of its portfolio. OrbiMed Advisors is also relatively very bullish on the stock, earmarking 0.41 percent of its 13F equity portfolio to VRCA.
Seeing as Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) has witnessed declining sentiment from the smart money, we can see that there exists a select few fund managers who sold off their full holdings by the end of the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $1.7 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also dumped its stock, about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) but similarly valued. These stocks are Miller Industries, Inc. (NYSE:MLR), ORBCOMM Inc (NASDAQ:ORBC), Cross Country Healthcare, Inc. (NASDAQ:CCRN), and NI Holdings, Inc. (NASDAQ:NODK). 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 |
|---|---|---|---|
| MLR | 10 | 59784 | 2 |
| ORBC | 14 | 62666 | 1 |
| CCRN | 14 | 31200 | 6 |
| NODK | 7 | 26044 | 1 |
| Average | 11.25 | 44924 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $72 million in VRCA’s case. ORBCOMM Inc (NASDAQ:ORBC) is the most popular stock in this table. On the other hand NI Holdings, Inc. (NASDAQ:NODK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) is even less popular than NODK. Hedge funds dodged a bullet by taking a bearish stance towards VRCA. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately VRCA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); VRCA investors were disappointed as the stock returned 1.2% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
