It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Aimmune Therapeutics Inc (NASDAQ:AIMT) changed during the first quarter.
Aimmune Therapeutics Inc (NASDAQ:AIMT) has experienced a decrease in hedge fund sentiment in recent months. AIMT was in 15 hedge funds’ portfolios at the end of the first quarter of 2019. There were 16 hedge funds in our database with AIMT holdings at the end of the previous quarter. Our calculations also showed that AIMT isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a peek at the key hedge fund action encompassing Aimmune Therapeutics Inc (NASDAQ:AIMT).
What have hedge funds been doing with Aimmune Therapeutics Inc (NASDAQ:AIMT)?
Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AIMT over the last 15 quarters. So, let’s check out 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, Palo Alto Investors, managed by William Leland Edwards, holds the biggest position in Aimmune Therapeutics Inc (NASDAQ:AIMT). Palo Alto Investors has a $83.8 million position in the stock, comprising 3.5% of its 13F portfolio. The second most bullish fund manager is Dennis Purcell of Aisling Capital, with a $44.5 million position; 66.8% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism comprise John Smith Clark’s Southpoint Capital Advisors, Julian Baker and Felix Baker’s Baker Bros. Advisors and Jim Tananbaum’s Foresite Capital.
Seeing as Aimmune Therapeutics Inc (NASDAQ:AIMT) has faced bearish sentiment from hedge fund managers, it’s safe to say that there were a few hedge funds that slashed their entire stakes in the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $14.7 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $5.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Aimmune Therapeutics Inc (NASDAQ:AIMT). We will take a look at Ambarella Inc (NASDAQ:AMBA), Shutterfly, Inc. (NASDAQ:SFLY), Suburban Propane Partners LP (NYSE:SPH), and TriMas Corp (NASDAQ:TRS). All of these stocks’ market caps match AIMT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMBA | 19 | 100486 | 5 |
| SFLY | 28 | 423757 | 6 |
| SPH | 5 | 86935 | 0 |
| TRS | 18 | 123730 | 2 |
| Average | 17.5 | 183727 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $203 million in AIMT’s case. Shutterfly, Inc. (NASDAQ:SFLY) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 5 bullish hedge fund positions. Aimmune Therapeutics Inc (NASDAQ:AIMT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AIMT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AIMT investors were disappointed as the stock returned -10.2% 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
