Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) and see how the stock is affected by the recent hedge fund activity.
Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) has experienced an increase in hedge fund sentiment in recent months. Our calculations also showed that APLS isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to analyze the recent hedge fund action regarding Apellis Pharmaceuticals, Inc. (NASDAQ:APLS).
Hedge fund activity in Apellis Pharmaceuticals, Inc. (NASDAQ:APLS)
At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in APLS over the last 15 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Cormorant Asset Management, managed by Bihua Chen, holds the most valuable position in Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). Cormorant Asset Management has a $70.2 million position in the stock, comprising 4.7% of its 13F portfolio. The second largest stake is held by Lei Zhang of Hillhouse Capital Management, with a $40.9 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise Israel Englander’s Millennium Management, Samuel Isaly’s OrbiMed Advisors and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.
As one would reasonably expect, specific money managers were breaking ground themselves. OrbiMed Advisors, managed by Samuel Isaly, created the most outsized call position in Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). OrbiMed Advisors had $1.5 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $1 million investment in the stock during the quarter. The following funds were also among the new APLS investors: Peter Muller’s PDT Partners, Jim Simons’s Renaissance Technologies, and Thomas Bailard’s Bailard Inc.
Let’s check out hedge fund activity in other stocks similar to Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). We will take a look at FTS International, Inc. (NYSE:FTSI), Weis Markets, Inc. (NYSE:WMK), United Fire Group, Inc. (NASDAQ:UFCS), and Frontline Ltd (NYSE:FRO). All of these stocks’ market caps are closest to APLS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FTSI | 21 | 108942 | -1 |
| WMK | 15 | 82577 | -2 |
| UFCS | 10 | 14894 | -1 |
| FRO | 10 | 32390 | 4 |
| Average | 14 | 59701 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $283 million in APLS’s case. FTS International, Inc. (NYSE:FTSI) is the most popular stock in this table. On the other hand United Fire Group, Inc. (NASDAQ:UFCS) is the least popular one with only 10 bullish hedge fund positions. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on APLS as the stock returned 10.9% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
