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Appian Corporation (APPN): Hedge Funds Waiting For Big Gains

In this article you are going to find out whether hedge funds think Appian Corporation (NASDAQ:APPN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Hedge fund interest in Appian Corporation (NASDAQ:APPN) 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 APPN to other stocks including Farfetch Limited (NYSE:FTCH), Spirit Realty Capital Inc (NYSE:SRC), and Medallia, Inc. (NYSE:MDLA) to get a better sense of its popularity.

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Colin Moran Abdiel Capital

Colin Moran of Abdiel Capital 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 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 latest hedge fund action encompassing Appian Corporation (NASDAQ:APPN).

How are hedge funds trading Appian Corporation (NASDAQ:APPN)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in APPN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, Abdiel Capital Advisors was the largest shareholder of Appian Corporation (NASDAQ:APPN), with a stake worth $305.3 million reported as of the end of September. Trailing Abdiel Capital Advisors was D E Shaw, which amassed a stake valued at $36.9 million. StackLine Partners, Aubrey Capital Management, and Citadel Investment Group 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 Abdiel Capital Advisors allocated the biggest weight to Appian Corporation (NASDAQ:APPN), around 14.27% of its 13F portfolio. StackLine Partners is also relatively very bullish on the stock, designating 6.68 percent of its 13F equity portfolio to APPN.

Seeing as Appian Corporation (NASDAQ:APPN) has experienced falling interest from hedge fund managers, logic holds that there exists a select few money managers that elected to cut their positions entirely by the end of the first quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the largest stake of all the hedgies followed by Insider Monkey, valued at close to $2.3 million in stock. Josh Goldberg’s fund, G2 Investment Partners Management, also dumped its stock, about $1.5 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Appian Corporation (NASDAQ:APPN) but similarly valued. We will take a look at Farfetch Limited (NYSE:FTCH), Spirit Realty Capital Inc (NYSE:SRC), Medallia, Inc. (NYSE:MDLA), and PVH Corp (NYSE:PVH). All of these stocks’ market caps are closest to APPN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FTCH 22 400841 -5
SRC 18 76385 -8
MDLA 20 237596 -2
PVH 18 346896 -11
Average 19.5 265430 -6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $265 million. That figure was $374 million in APPN’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Spirit Realty Capital Inc (NYSE:SRC) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Appian Corporation (NASDAQ:APPN) is even less popular than SRC. Hedge funds clearly dropped the ball on APPN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on APPN as the stock returned 31.6% so far in 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.