Do Hedge Funds Love Anaplan, Inc. (PLAN)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Anaplan, Inc. (NYSE:PLAN).

Anaplan, Inc. (NYSE:PLAN) has seen a decrease in enthusiasm from smart money of late. Anaplan, Inc. (NYSE:PLAN) was in 52 hedge funds’ portfolios at the end of June. The all time high for this statistic is 63. There were 55 hedge funds in our database with PLAN holdings at the end of March. Our calculations also showed that PLAN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Philippe Laffont of Coatue Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to analyze the fresh hedge fund action surrounding Anaplan, Inc. (NYSE:PLAN).

Do Hedge Funds Think PLAN Is A Good Stock To Buy Now?

At Q2’s end, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PLAN over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, OZ Management, managed by Daniel S. Och, holds the number one position in Anaplan, Inc. (NYSE:PLAN). OZ Management has a $216.7 million position in the stock, comprising 1.6% of its 13F portfolio. Coming in second is Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $200.3 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other peers that are bullish consist of Philippe Laffont’s Coatue Management, Robert Pitts’s Steadfast Capital Management and Eric Bannasch’s Cadian Capital. In terms of the portfolio weights assigned to each position Cowbird Capital allocated the biggest weight to Anaplan, Inc. (NYSE:PLAN), around 7.52% of its 13F portfolio. Cadian Capital is also relatively very bullish on the stock, setting aside 7.42 percent of its 13F equity portfolio to PLAN.

Seeing as Anaplan, Inc. (NYSE:PLAN) has experienced declining sentiment from the smart money, it’s safe to say that there is a sect of money managers who sold off their full holdings heading into Q3. Interestingly, Michael Lowenstein’s Kensico Capital cut the biggest investment of the 750 funds followed by Insider Monkey, comprising close to $127.6 million in stock, and Josh Resnick’s Jericho Capital Asset Management was right behind this move, as the fund dropped about $61.2 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Anaplan, Inc. (NYSE:PLAN). We will take a look at PVH Corp (NYSE:PVH), Lattice Semiconductor Corporation (NASDAQ:LSCC), LG Display Co Ltd. (NYSE:LPL), Churchill Downs Incorporated (NASDAQ:CHDN), Rexford Industrial Realty Inc (NYSE:REXR), AutoNation, Inc. (NYSE:AN), and Cameco Corporation (NYSE:CCJ). This group of stocks’ market valuations are similar to PLAN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $588 million. That figure was $2142 million in PLAN’s case. Churchill Downs Incorporated (NASDAQ:CHDN) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Anaplan, Inc. (NYSE:PLAN) is more popular among hedge funds. Our overall hedge fund sentiment score for PLAN is 76.8. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on PLAN as the stock returned 16.3% since the end of June (through 10/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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