Were Hedge Funds Right About Warming Up To Aptinyx Inc. (APTX)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Aptinyx Inc. (NASDAQ:APTX) and determine whether the smart money was really smart about this stock.

Is Aptinyx Inc. (NASDAQ:APTX) the right investment to pursue these days? Hedge funds were getting more optimistic. The number of bullish hedge fund positions rose by 1 recently. Our calculations also showed that APTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

Samuel Isaly Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the recent hedge fund action surrounding Aptinyx Inc. (NASDAQ:APTX).

How have hedgies been trading Aptinyx Inc. (NASDAQ:APTX)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in APTX over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Is APTX A Good Stock To Buy?

Among these funds, Adams Street Partners held the most valuable stake in Aptinyx Inc. (NASDAQ:APTX), which was worth $11.3 million at the end of the third quarter. On the second spot was Frazier Healthcare Partners which amassed $6.9 million worth of shares. OrbiMed Advisors, Ikarian Capital, and Renaissance Technologies 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 Adams Street Partners allocated the biggest weight to Aptinyx Inc. (NASDAQ:APTX), around 2.81% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, designating 0.78 percent of its 13F equity portfolio to APTX.

Now, key hedge funds were leading the bulls’ herd. Ikarian Capital, managed by Neil Shahrestani, created the biggest position in Aptinyx Inc. (NASDAQ:APTX). Ikarian Capital had $1.3 million invested in the company at the end of the quarter. Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund also made a $0.9 million investment in the stock during the quarter.

Let’s check out hedge fund activity in other stocks similar to Aptinyx Inc. (NASDAQ:APTX). These stocks are Carrols Restaurant Group, Inc. (NASDAQ:TAST), Great Panther Mining Ltd (NYSE:GPL), Roadrunner Transportation Systems Inc (NYSE:RRTS), and CRH Medical Corporation (NYSE:CRHM). All of these stocks’ market caps are closest to APTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TAST 11 14256 -3
GPL 5 1963 1
RRTS 4 88085 1
CRHM 7 16880 0
Average 6.75 30296 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $25 million in APTX’s case. Carrols Restaurant Group, Inc. (NASDAQ:TAST) is the most popular stock in this table. On the other hand Roadrunner Transportation Systems Inc (NYSE:RRTS) is the least popular one with only 4 bullish hedge fund positions. Aptinyx Inc. (NASDAQ:APTX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on APTX as the stock returned 93.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.