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Satsuma Pharmaceuticals, Inc. (STSA): Hedge Funds In Wait-and-See Mode

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA).

Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of March. At the end of this article we will also compare STSA to other stocks including Fortuna Silver Mines Inc. (NYSE:FSM), Ruhnn Holding Limited (NASDAQ:RUHN), and ADTRAN, Inc. (NASDAQ:ADTN) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are assumed to be worthless, outdated investment vehicles of yesteryear. While there are over 8000 funds trading today, Our researchers choose to focus on the aristocrats of this group, approximately 850 funds. These hedge fund managers control the majority of the smart money’s total asset base, and by keeping track of their first-class picks, Insider Monkey has revealed several investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Peter Kolchinsky of RA Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the fresh hedge fund action encompassing Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA).

What have hedge funds been doing with Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA)?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in STSA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is STSA A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, RA Capital Management, managed by Peter Kolchinsky, holds the largest position in Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA). RA Capital Management has a $100.8 million position in the stock, comprising 3.2% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $22 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish include Bihua Chen’s Cormorant Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Ken Greenberg and David Kim’s Ghost Tree Capital. In terms of the portfolio weights assigned to each position RA Capital Management allocated the biggest weight to Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA), around 3.18% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, setting aside 0.81 percent of its 13F equity portfolio to STSA.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Zimmer Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Ghost Tree Capital).

Let’s check out hedge fund activity in other stocks similar to Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA). These stocks are Fortuna Silver Mines Inc. (NYSE:FSM), Ruhnn Holding Limited (NASDAQ:RUHN), ADTRAN, Inc. (NASDAQ:ADTN), and G-III Apparel Group, Ltd. (NASDAQ:GIII). This group of stocks’ market values match STSA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FSM 8 33856 -1
RUHN 2 228 0
ADTN 16 43668 3
GIII 17 44550 -2
Average 10.75 30576 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $158 million in STSA’s case. G-III Apparel Group, Ltd. (NASDAQ:GIII) is the most popular stock in this table. On the other hand Ruhnn Holding Limited (NASDAQ:RUHN) is the least popular one with only 2 bullish hedge fund positions. Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on STSA as the stock returned 21.7% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.