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Did Hedge Funds Make The Right Call On Adaptive Biotechnologies Corporation (ADPT)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Adaptive Biotechnologies Corporation (NASDAQ:ADPT) based on that data and determine whether they were really smart about the stock.

Adaptive Biotechnologies Corporation (NASDAQ:ADPT) has experienced a decrease in hedge fund sentiment in recent months. ADPT was in 18 hedge funds’ portfolios at the end of March. There were 22 hedge funds in our database with ADPT positions at the end of the previous quarter. Our calculations also showed that ADPT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a look at the key hedge fund action encompassing Adaptive Biotechnologies Corporation (NASDAQ:ADPT).

How are hedge funds trading Adaptive Biotechnologies Corporation (NASDAQ:ADPT)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the fourth quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in ADPT a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Is ADPT A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Viking Global, managed by Andreas Halvorsen, holds the most valuable position in Adaptive Biotechnologies Corporation (NASDAQ:ADPT). Viking Global has a $930.5 million position in the stock, comprising 4.8% of its 13F portfolio. Coming in second is Matrix Capital Management, led by David Goel and Paul Ferri, holding a $419.9 million position; the fund has 10.7% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of Doug Silverman and Alexander Klabin’s Senator Investment Group, Julian Robertson’s Tiger Management and Eli Casdin’s Casdin Capital. In terms of the portfolio weights assigned to each position Matrix Capital Management allocated the biggest weight to Adaptive Biotechnologies Corporation (NASDAQ:ADPT), around 10.73% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, earmarking 10.41 percent of its 13F equity portfolio to ADPT.

Since Adaptive Biotechnologies Corporation (NASDAQ:ADPT) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers who sold off their positions entirely last quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group dumped the largest position of the 750 funds tracked by Insider Monkey, totaling close to $15.9 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $12.7 million worth. These moves are interesting, as aggregate hedge fund interest fell by 4 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Adaptive Biotechnologies Corporation (NASDAQ:ADPT) but similarly valued. We will take a look at Alaska Air Group, Inc. (NYSE:ALK), Terreno Realty Corporation (NYSE:TRNO), BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), and Zai Lab Limited (NASDAQ:ZLAB). All of these stocks’ market caps match ADPT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALK 27 263441 -12
TRNO 10 26182 -4
BJ 26 156840 4
ZLAB 22 364537 -4
Average 21.25 202750 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $203 million. That figure was $1592 million in ADPT’s case. Alaska Air Group, Inc. (NYSE:ALK) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 10 bullish hedge fund positions. Adaptive Biotechnologies Corporation (NASDAQ:ADPT) is not the least popular stock in this group but hedge fund interest is still below average. 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on ADPT as the stock returned 36.2% since the end of March and outperformed the market by an even larger margin.

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