How do you pick the next stock to invest in? One way would be to spend days 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 Aimmune Therapeutics Inc (NASDAQ:AIMT) and determine whether hedge funds had an edge regarding this stock.
Aimmune Therapeutics Inc (NASDAQ:AIMT) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that AIMT 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.
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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
James Dondero of Highland Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a look at the key hedge fund action regarding Aimmune Therapeutics Inc (NASDAQ:AIMT).
What does smart money think about Aimmune Therapeutics Inc (NASDAQ:AIMT)?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AIMT over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Palo Alto Investors, managed by William Leland Edwards, holds the biggest position in Aimmune Therapeutics Inc (NASDAQ:AIMT). Palo Alto Investors has a $47.5 million position in the stock, comprising 4% of its 13F portfolio. The second most bullish fund manager is Point72 Asset Management, led by Steve Cohen, holding a $22.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management, Sander Gerber’s Hudson Bay Capital Management and Julian Baker and Felix Baker’s Baker Bros. Advisors. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to Aimmune Therapeutics Inc (NASDAQ:AIMT), around 3.98% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, designating 1.93 percent of its 13F equity portfolio to AIMT.
As aggregate interest increased, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in Aimmune Therapeutics Inc (NASDAQ:AIMT). Point72 Asset Management had $22.3 million invested in the company at the end of the quarter. Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management also initiated a $14.5 million position during the quarter. The following funds were also among the new AIMT investors: Steven Boyd’s Armistice Capital, Israel Englander’s Millennium Management, and Srini Akkaraju and Michael Dybbs’s Samsara BioCapital.
Let’s now review hedge fund activity in other stocks similar to Aimmune Therapeutics Inc (NASDAQ:AIMT). We will take a look at NuStar Energy L.P. (NYSE:NS), ATN International, Inc. (NASDAQ:ATNI), SecureWorks Corp. (NASDAQ:SCWX), and Winnebago Industries, Inc. (NYSE:WGO). This group of stocks’ market values are closest to AIMT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NS | 4 | 8087 | -3 |
| ATNI | 8 | 59085 | -1 |
| SCWX | 11 | 11882 | -3 |
| WGO | 19 | 131961 | -4 |
| Average | 10.5 | 52754 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $138 million in AIMT’s case. Winnebago Industries, Inc. (NYSE:WGO) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 4 bullish hedge fund positions. Aimmune Therapeutics Inc (NASDAQ:AIMT) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately AIMT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AIMT were disappointed as the stock returned 1.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Aimmune Therapeutics Inc. (NASDAQ:AIMT)
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Disclosure: None. This article was originally published at Insider Monkey.
