How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Appian Corporation (NASDAQ:APPN).
Is Appian Corporation (NASDAQ:APPN) an outstanding investment today? Money managers are taking an optimistic view. The number of long hedge fund bets inched up by 1 in recent months. Our calculations also showed that APPN isn’t among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
How have hedgies been trading Appian Corporation (NASDAQ:APPN)?
Heading into the first quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in APPN over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Abdiel Capital Advisors was the largest shareholder of Appian Corporation (NASDAQ:APPN), with a stake worth $199.1 million reported as of the end of December. Trailing Abdiel Capital Advisors was EastBay Asset Management, which amassed a stake valued at $20.6 million. StackLine Partners, Engle Capital, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers have been driving this bullishness. EastBay Asset Management, managed by Adam Wolfberg and Steven Landry, initiated the most outsized position in Appian Corporation (NASDAQ:APPN). EastBay Asset Management had $20.6 million invested in the company at the end of the quarter. Brian Gootzeit and Andrew Frank’s StackLine Partners also made a $10.4 million investment in the stock during the quarter. The other funds with brand new APPN positions are Israel Englander’s Millennium Management and Michael Gelband’s ExodusPoint Capital.
Let’s now review 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 United Community Banks Inc (NASDAQ:UCBI), Brinker International, Inc. (NYSE:EAT), Cloudera, Inc. (NYSE:CLDR), and ServisFirst Bancshares, Inc. (NASDAQ:SFBS). This group of stocks’ market values resemble APPN’s market value.
|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 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $247 million in APPN’s case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Appian Corporation (NASDAQ:APPN) is even less popular than SFBS. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on APPN, though not to the same extent, as the stock returned 23.1% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.