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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) and determine whether the smart money was really smart about this stock.
Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) has seen a decrease in activity from the world’s largest hedge funds in recent months. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. There were 30 hedge funds in our database with APLS holdings at the end of March. Our calculations also showed that APLS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Lei Zhang of Hillhouse Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s take a look at the recent hedge fund action regarding Apellis Pharmaceuticals, Inc. (NASDAQ:APLS).
What does smart money think about Apellis Pharmaceuticals, Inc. (NASDAQ:APLS)?
Heading into the third quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in APLS 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.
More specifically, Hillhouse Capital Management was the largest shareholder of Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), with a stake worth $164.2 million reported as of the end of September. Trailing Hillhouse Capital Management was Farallon Capital, which amassed a stake valued at $73.5 million. Cormorant Asset Management, Citadel Investment Group, and Millennium Management were 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 Cormorant Asset Management allocated the biggest weight to Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), around 2.57% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 2.3 percent of its 13F equity portfolio to APLS.
Seeing as Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) has experienced a decline in interest from the smart money, it’s easy to see that there exists a select few money managers who were dropping their positions entirely by the end of the second quarter. It’s worth mentioning that Michael Rockefeller and KarláKroeker’s Woodline Partners dropped the largest investment of the 750 funds tracked by Insider Monkey, worth close to $6 million in stock, and Samuel Isaly’s OrbiMed Advisors was right behind this move, as the fund said goodbye to about $1.4 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks similar to Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). We will take a look at Cornerstone OnDemand, Inc. (NASDAQ:CSOD), National General Holdings Corp (NASDAQ:NGHC), Shenandoah Telecommunications Company (NASDAQ:SHEN), Bank of Hawaii Corporation (NYSE:BOH), Option Care Health, Inc. (NASDAQ:OPCH), Premier Inc (NASDAQ:PINC), and Valmont Industries, Inc. (NYSE:VMI). This group of stocks’ market valuations match APLS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSOD | 31 | 565272 | 7 |
| NGHC | 17 | 241316 | -1 |
| SHEN | 8 | 90518 | -3 |
| BOH | 18 | 75639 | 1 |
| OPCH | 11 | 25219 | 4 |
| PINC | 15 | 185986 | -2 |
| VMI | 27 | 255232 | 3 |
| Average | 18.1 | 205597 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $564 million in APLS’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Shenandoah Telecommunications Company (NASDAQ:SHEN) is the least popular one with only 8 bullish hedge fund positions. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APLS is 77.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately APLS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on APLS were disappointed as the stock returned -5.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
