Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Aphria Inc. (NYSE:APHA).
Hedge fund interest in Aphria Inc. (NYSE:APHA) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare APHA to other stocks including Transportadora de Gas del Sur SA (NYSE:TGS), Regenxbio Inc (NASDAQ:RGNX), and First Commonwealth Financial Corporation (NYSE:FCF) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. 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 already gained 20 percent. With all of this in mind let’s take a look at the key hedge fund action encompassing Aphria Inc. (NYSE:APHA).
Hedge fund activity in Aphria Inc. (NYSE:APHA)
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in APHA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Aphria Inc. (NYSE:APHA) was held by Citadel Investment Group, which reported holding $1.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $1.7 million position. Other investors bullish on the company included Sculptor Capital, GLG Partners, and EMS Capital. In terms of the portfolio weights assigned to each position Signition LP allocated the biggest weight to Aphria Inc. (NYSE:APHA), around 0.35% of its 13F portfolio. EMS Capital is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to APHA.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 683 Capital 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 Signition LP).
Let’s go over hedge fund activity in other stocks similar to Aphria Inc. (NYSE:APHA). These stocks are Transportadora de Gas del Sur SA (NYSE:TGS), Regenxbio Inc (NASDAQ:RGNX), First Commonwealth Financial Corporation (NYSE:FCF), and Scholastic Corporation (NASDAQ:SCHL). This group of stocks’ market valuations resemble APHA’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $74 million. That figure was $3 million in APHA’s case. Scholastic Corporation (NASDAQ:SCHL) is the most popular stock in this table. On the other hand Transportadora de Gas del Sur SA (NYSE:TGS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Aphria Inc. (NYSE:APHA) is even less popular than TGS. Hedge funds dodged a bullet by taking a bearish stance towards APHA. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately APHA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); APHA investors were disappointed as the stock returned -8.7% during the fourth quarter (through the end of November) 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.