We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Appian Corporation (NASDAQ:APPN).
Is Appian Corporation (NASDAQ:APPN) an excellent investment right now? Money managers are turning less bullish. The number of long hedge fund positions fell by 2 recently. Our calculations also showed that APPN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). APPN was in 17 hedge funds’ portfolios at the end of December. There were 19 hedge funds in our database with APPN positions at the end of the previous quarter.
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 41 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.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the new hedge fund action surrounding Appian Corporation (NASDAQ:APPN).
How have hedgies been trading Appian Corporation (NASDAQ:APPN)?
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in APPN a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Appian Corporation (NASDAQ:APPN) was held by Abdiel Capital Advisors, which reported holding $283.7 million worth of stock at the end of September. It was followed by D E Shaw with a $49.6 million position. Other investors bullish on the company included StackLine Partners, Engle Capital, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Appian Corporation (NASDAQ:APPN), around 17.73% of its 13F portfolio. StackLine Partners is also relatively very bullish on the stock, dishing out 6.78 percent of its 13F equity portfolio to APPN.
Seeing as Appian Corporation (NASDAQ:APPN) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few funds that elected to cut their full holdings last quarter. Intriguingly, Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $2.4 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund cut about $1.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Appian Corporation (NASDAQ:APPN). These stocks are Weight Watchers International, Inc. (NASDAQ:WW), AAON, Inc. (NASDAQ:AAON), Tower Semiconductor Ltd. (NASDAQ:TSEM), and WesBanco, Inc. (NASDAQ:WSBC). This group of stocks’ market valuations are closest to APPN’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 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $254 million. That figure was $381 million in APPN’s case. Weight Watchers International, Inc. (NASDAQ:WW) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 7 bullish hedge fund positions. Appian Corporation (NASDAQ:APPN) is not the least popular stock in this group but hedge fund interest is still below average. 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. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on APPN as the stock returned 0.4% during the same time period and outperformed the market by an even larger margin.
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.