Apellis Pharmaceuticals, Inc. (APLS) vs. Hedge Fund Favorites in 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Apellis Pharmaceuticals, Inc. (NASDAQ:APLS).

Is Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) a buy right now? Prominent investors are in an optimistic mood. The number of bullish hedge fund positions moved up by 7 recently. Our calculations also showed that APLS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). APLS was in 24 hedge funds’ portfolios at the end of the third quarter of 2019. There were 17 hedge funds in our database with APLS positions at the end of the previous quarter.

In the eyes of most investors, hedge funds are seen as worthless, old investment tools of the past. While there are greater than 8000 funds with their doors open at the moment, Our researchers hone in on the crème de la crème of this group, about 750 funds. It is estimated that this group of investors preside over most of all hedge funds’ total asset base, and by shadowing their first-class stock picks, Insider Monkey has spotted a few investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum 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 Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a glance at the recent hedge fund action surrounding Apellis Pharmaceuticals, Inc. (NASDAQ:APLS).

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

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in APLS a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

More specifically, Hillhouse Capital Management was the largest shareholder of Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), with a stake worth $112.7 million reported as of the end of September. Trailing Hillhouse Capital Management was Cormorant Asset Management, which amassed a stake valued at $71.7 million. Millennium Management, Sectoral Asset Management, and OrbiMed Advisors 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 4.36% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, earmarking 4.14 percent of its 13F equity portfolio to APLS.

Consequently, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, established the largest call position in Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). Millennium Management had $7.2 million invested in the company at the end of the quarter. Nathan Fischel’s DAFNA Capital Management also made a $4.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and Highbridge Capital Management.

Let’s go over hedge fund activity in other stocks similar to Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). These stocks are Easterly Government Properties Inc (NYSE:DEA), Archrock, Inc. (NYSE:AROC), USANA Health Sciences, Inc. (NYSE:USNA), and HNI Corp (NYSE:HNI). This group of stocks’ market valuations resemble APLS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DEA 9 82346 3
AROC 11 20540 3
USNA 12 169990 -1
HNI 16 79013 2
Average 12 87972 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $350 million in APLS’s case. HNI Corp (NYSE:HNI) is the most popular stock in this table. On the other hand Easterly Government Properties Inc (NYSE:DEA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is more popular among hedge funds. 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 10.1 percentage points. Hedge funds were also right about betting on APLS as the stock returned 132.1% in 2019 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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