Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Aimmune Therapeutics Inc (NASDAQ:AIMT).
Is Aimmune Therapeutics Inc (NASDAQ:AIMT) a buy right now? Investors who are in the know are becoming less confident. The number of bullish hedge fund bets fell by 2 in recent months. Our calculations also showed that AIMT isn’t among the 30 most popular stocks among hedge funds. AIMT was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 18 hedge funds in our database with AIMT holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a glance at the recent hedge fund action regarding Aimmune Therapeutics Inc (NASDAQ:AIMT).
How are hedge funds trading Aimmune Therapeutics Inc (NASDAQ:AIMT)?
At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in AIMT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Aisling Capital was the largest shareholder of Aimmune Therapeutics Inc (NASDAQ:AIMT), with a stake worth $47.6 million reported as of the end of December. Trailing Aisling Capital was Palo Alto Investors, which amassed a stake valued at $33.2 million. Southpoint Capital Advisors, Foresite Capital, and Baker Bros. Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Aimmune Therapeutics Inc (NASDAQ:AIMT) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that slashed their positions entirely heading into Q3. Interestingly, James E. Flynn’s Deerfield Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $15.1 million in call options, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $5.8 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q3.
Let’s check out hedge fund activity in other stocks similar to Aimmune Therapeutics Inc (NASDAQ:AIMT). These stocks are Callon Petroleum Company (NYSE:CPE), Spark Therapeutics Inc (NASDAQ:ONCE), FGL Holdings (NYSE:FG), and Rapid7 Inc (NASDAQ:RPD). All of these stocks’ market caps resemble AIMT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPE | 22 | 175464 | -4 |
| ONCE | 15 | 329072 | -6 |
| FG | 29 | 207993 | 1 |
| RPD | 24 | 255954 | 7 |
| Average | 22.5 | 242121 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $189 million in AIMT’s case. FGL Holdings (NYSE:FG) is the most popular stock in this table. On the other hand Spark Therapeutics Inc (NASDAQ:ONCE) is the least popular one with only 15 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately AIMT wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); AIMT investors were disappointed as the stock returned -15% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
