Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards AppHarvest, Inc. (NASDAQ:APPH).
Is APPH a good stock to buy? The smart money was turning bullish. The number of bullish hedge fund bets increased by 21 lately. AppHarvest, Inc. (NASDAQ:APPH) was in 21 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that APPH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to go over the recent hedge fund action encompassing AppHarvest, Inc. (NASDAQ:APPH).
Do Hedge Funds Think APPH Is A Good Stock To Buy Now?
At first quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21 from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards APPH over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Inclusive Capital was the largest shareholder of AppHarvest, Inc. (NASDAQ:APPH), with a stake worth $215.9 million reported as of the end of March. Trailing Inclusive Capital was Alyeska Investment Group, which amassed a stake valued at $113 million. D E Shaw, Athanor Capital, and 13D 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 Inclusive Capital allocated the biggest weight to AppHarvest, Inc. (NASDAQ:APPH), around 16.05% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, earmarking 2.21 percent of its 13F equity portfolio to APPH.
As one would reasonably expect, some big names were breaking ground themselves. Inclusive Capital, managed by Jeff Ubben, initiated the most valuable position in AppHarvest, Inc. (NASDAQ:APPH). Inclusive Capital had $215.9 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $113 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Parvinder Thiara’s Athanor Capital, and Kenneth Squire’s 13D Management.
Let’s also examine hedge fund activity in other stocks similar to AppHarvest, Inc. (NASDAQ:APPH). These stocks are 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), Horace Mann Educators Corporation (NYSE:HMN), GMS Inc. (NYSE:GMS), ArcBest Corp (NASDAQ:ARCB), Virtus Investment Partners Inc (NASDAQ:VRTS), Ping Identity Holding Corp. (NYSE:PING), and BGC Partners, Inc. (NASDAQ:BGCP). All of these stocks’ market caps resemble APPH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLWS | 22 | 62575 | -5 |
| HMN | 14 | 43951 | 1 |
| GMS | 19 | 266527 | 3 |
| ARCB | 13 | 87202 | -1 |
| VRTS | 20 | 143608 | 0 |
| PING | 11 | 873908 | -5 |
| BGCP | 21 | 305412 | -3 |
| Average | 17.1 | 254740 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $381 million in APPH’s case. 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) is the most popular stock in this table. On the other hand Ping Identity Holding Corp. (NYSE:PING) is the least popular one with only 11 bullish hedge fund positions. AppHarvest, Inc. (NASDAQ:APPH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APPH is 82.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately APPH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on APPH were disappointed as the stock returned -29.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.