We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Appian Corporation (NASDAQ:APPN).
Is APPN a good stock to buy now? Hedge funds were becoming less confident. The number of bullish hedge fund bets were cut by 3 in recent months. Appian Corporation (NASDAQ:APPN) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 19. Our calculations also showed that APPN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 18 hedge funds in our database with APPN holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Now let’s take a look at the fresh hedge fund action surrounding Appian Corporation (NASDAQ:APPN).
Do Hedge Funds Think APPN Is A Good Stock To Buy Now?
At third quarter’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in APPN over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Abdiel Capital Advisors held the most valuable stake in Appian Corporation (NASDAQ:APPN), which was worth $521.9 million at the end of the third quarter. On the second spot was StackLine Partners which amassed $28.1 million worth of shares. Athanor Capital, Citadel Investment Group, and Citadel Investment Group 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 Abdiel Capital Advisors allocated the biggest weight to Appian Corporation (NASDAQ:APPN), around 16.39% of its 13F portfolio. StackLine Partners is also relatively very bullish on the stock, setting aside 10.74 percent of its 13F equity portfolio to APPN.
Seeing as Appian Corporation (NASDAQ:APPN) has faced a decline in interest from hedge fund managers, it’s easy to see that there is a sect of money managers that slashed their entire stakes by the end of the third quarter. Intriguingly, Andrew Dalrymple and Barry McCorkell’s Aubrey Capital Management dumped the largest stake of all the hedgies watched by Insider Monkey, totaling about $5.1 million in stock, and Daniel S. Och’s OZ Management was right behind this move, as the fund cut about $4 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Appian Corporation (NASDAQ:APPN) but similarly valued. These stocks are Freshpet Inc (NASDAQ:FRPT), MDU Resources Group Inc (NYSE:MDU), SmileDirectClub, Inc. (NASDAQ:SDC), United Therapeutics Corporation (NASDAQ:UTHR), Continental Resources, Inc. (NYSE:CLR), Old Republic International Corporation (NYSE:ORI), and Nutanix, Inc. (NASDAQ:NTNX). This group of stocks’ market caps are closest to APPN’s market cap.
|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 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $588 million in APPN’s case. United Therapeutics Corporation (NASDAQ:UTHR) is the most popular stock in this table. On the other hand Freshpet Inc (NASDAQ:FRPT) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Appian Corporation (NASDAQ:APPN) is even less popular than FRPT. Our overall hedge fund sentiment score for APPN is 25.7. 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. Hedge funds clearly dropped the ball on APPN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on APPN as the stock returned 122.7% since Q3 (through December 14th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.