We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Apellis Pharmaceuticals, Inc. (NASDAQ:APLS).
Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) has experienced an increase in support from the world’s most elite money managers of late. Our calculations also showed that APLS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are tons of metrics market participants use to evaluate publicly traded companies. A couple of the most innovative metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can outperform the market by a solid margin (see the details here).
Lei Zhang of Hillhouse Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the key hedge fund action encompassing Apellis Pharmaceuticals, Inc. (NASDAQ:APLS).
How are hedge funds trading Apellis Pharmaceuticals, Inc. (NASDAQ:APLS)?
At Q4’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards APLS over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Hillhouse Capital Management, managed by Lei Zhang, holds the biggest position in Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). Hillhouse Capital Management has a $143.2 million position in the stock, comprising 1.8% of its 13F portfolio. Sitting at the No. 2 spot is Cormorant Asset Management, managed by Bihua Chen, which holds a $82.7 million position; the fund has 3.3% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions contain Arsani William’s Logos Capital, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Logos Capital allocated the biggest weight to Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), around 4.43% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, dishing out 3.3 percent of its 13F equity portfolio to APLS.
As one would reasonably expect, key money managers have jumped into Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) headfirst. Logos Capital, managed by Arsani William, established the biggest position in Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). Logos Capital had $18 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $17 million investment in the stock during the quarter. The other funds with new positions in the stock are Farallon Capital, Ken Greenberg and David Kim’s Ghost Tree Capital, and Mitchell Blutt’s Consonance Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) but similarly valued. We will take a look at Karuna Therapeutics, Inc. (NASDAQ:KRTX), Great Western Bancorp Inc (NYSE:GWB), Workiva Inc (NYSE:WK), and Federal Signal Corporation (NYSE:FSS). This group of stocks’ market values are similar to APLS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KRTX | 15 | 136671 | 6 |
| GWB | 17 | 47873 | 6 |
| WK | 17 | 135876 | -5 |
| FSS | 18 | 90579 | -2 |
| Average | 16.75 | 102750 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $417 million in APLS’s case. Federal Signal Corporation (NYSE:FSS) is the most popular stock in this table. On the other hand Karuna Therapeutics, Inc. (NASDAQ:KRTX) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is more popular among hedge funds. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still managed to beat the market by 4.2 percentage points. Hedge funds were also right about betting on APLS as the stock returned -11.5% so far in 2020 (through April 6th) 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
