Did Hedge Funds Get Apellis Pharmaceuticals, Inc. (APLS) Right?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) a buy, sell, or hold? Money managers were cutting their exposure. The number of long hedge fund positions decreased by 1 recently. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that APLS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 31 hedge funds in our database with APLS holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the recent hedge fund action encompassing Apellis Pharmaceuticals, Inc. (NASDAQ:APLS).

Do Hedge Funds Think APLS Is A Good Stock To Buy Now?

At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter of 2021. On the other hand, there were a total of 29 hedge funds with a bullish position in APLS a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

More specifically, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), with a stake worth $164.8 million reported as of the end of September. Trailing Avoro Capital Advisors (venBio Select Advisor) was Citadel Investment Group, which amassed a stake valued at $61.3 million. Octagon Capital Advisors, Logos Capital, and Cormorant Asset 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 Octagon Capital Advisors allocated the biggest weight to Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), around 12.95% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, setting aside 3.45 percent of its 13F equity portfolio to APLS.

Judging by the fact that Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few money managers who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Lei Zhang’s Hillhouse Capital Management said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, valued at close to $185.2 million in stock, and Julian Baker and Felix Baker’s Baker Bros. Advisors was right behind this move, as the fund sold off about $143.6 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) but similarly valued. These stocks are Cytek Biosciences Inc. (NASDAQ:CTKB), TransAlta Corporation (NYSE:TAC), Cactus, Inc. (NYSE:WHD), Herman Miller, Inc. (NASDAQ:MLHR), MakeMyTrip Limited (NASDAQ:MMYT), Vertex, Inc. (NASDAQ:VERX), and United Community Banks Inc (NASDAQ:UCBI). This group of stocks’ market caps are closest to APLS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $510 million in APLS’s case. Herman Miller, Inc. (NASDAQ:MLHR) is the most popular stock in this table. On the other hand Cactus, Inc. (NYSE:WHD) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is more popular among hedge funds. Our overall hedge fund sentiment score for APLS is 79.7. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on APLS as the stock returned 22.2% since the end of September (through 1/31) 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.

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

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