Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Blue Apron Holdings, Inc. (NYSE:APRN) to find out whether there were any major changes in hedge funds’ views.
Is APRN a good stock to buy now? Blue Apron Holdings, Inc. (NYSE:APRN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of September. Our calculations also showed that APRN 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), and CVR Partners LP (NYSE:UAN) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. With all of this in mind let’s take a gander at the new hedge fund action surrounding Blue Apron Holdings, Inc. (NYSE:APRN).
Hedge fund activity in Blue Apron Holdings, Inc. (NYSE:APRN)
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 8 hedge funds with a bullish position in APRN a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Blue Apron Holdings, Inc. (NYSE:APRN) was held by D E Shaw, which reported holding $1.9 million worth of stock at the end of September. It was followed by Maverick Capital with a $1.6 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Maverick Capital allocated the biggest weight to Blue Apron Holdings, Inc. (NYSE:APRN), around 0.03% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to APRN.
Due to the fact that Blue Apron Holdings, Inc. (NYSE:APRN) has witnessed declining sentiment from hedge fund managers, we can see that there is a sect of hedgies who were dropping their entire stakes heading into Q4. It’s worth mentioning that David Greenspan’s Slate Path Capital dumped the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $3.3 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also said goodbye to its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Blue Apron Holdings, Inc. (NYSE:APRN). These stocks are Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), CVR Partners LP (NYSE:UAN), O2Micro International Limited (NASDAQ:OIIM), Park City Group, Inc. (NYSE:PCYG), Senseonics Holdings, Inc. (NYSE:SENS), and EMCORE Corporation (NASDAQ:EMKR). This group of stocks’ market caps resemble APRN’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 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $6 million in APRN’s case. EMCORE Corporation (NASDAQ:EMKR) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only 2 bullish hedge fund positions. Blue Apron Holdings, Inc. (NYSE:APRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APRN is 47.5. 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 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 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately APRN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on APRN were disappointed as the stock returned 3.5% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.