Is Anaplan, Inc. (PLAN) A Good Stock To Buy?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Anaplan, Inc. (NYSE:PLAN).

Is PLAN a good stock to buy? Anaplan, Inc. (NYSE:PLAN) has seen a decrease in enthusiasm from smart money lately. Anaplan, Inc. (NYSE:PLAN) was in 55 hedge funds’ portfolios at the end of March. The all time high for this statistic is 63. There were 63 hedge funds in our database with PLAN positions at the end of the fourth quarter. Our calculations also showed that PLAN isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.

Sahm Adrangi of Kerrisdale Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $29 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Now let’s take a look at the recent hedge fund action encompassing Anaplan, Inc. (NYSE:PLAN).

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

Heading into the second quarter of 2021, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 51 hedge funds with a bullish position in PLAN a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Coatue Management held the most valuable stake in Anaplan, Inc. (NYSE:PLAN), which was worth $296.8 million at the end of the fourth quarter. On the second spot was OZ Management which amassed $206.7 million worth of shares. Alkeon Capital Management, Steadfast Capital Management, and Suvretta Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cowbird Capital allocated the biggest weight to Anaplan, Inc. (NYSE:PLAN), around 9.78% of its 13F portfolio. Kensico Capital is also relatively very bullish on the stock, earmarking 4.12 percent of its 13F equity portfolio to PLAN.

Due to the fact that Anaplan, Inc. (NYSE:PLAN) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of money managers who were dropping their positions entirely in the first quarter. At the top of the heap, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising about $140.4 million in stock, and Gabriel Plotkin’s Melvin Capital Management was right behind this move, as the fund sold off about $100.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 8 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Anaplan, Inc. (NYSE:PLAN) but similarly valued. We will take a look at Fate Therapeutics Inc (NASDAQ:FATE), Fastly, Inc. (NYSE:FSLY), Performance Food Group Company (NYSE:PFGC), Capri Holdings Limited (NYSE:CPRI), AutoNation, Inc. (NYSE:AN), Western Midstream Partners, LP (NYSE:WES), and Kilroy Realty Corp (NYSE:KRC). All of these stocks’ market caps match PLAN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $891 million. That figure was $2368 million in PLAN’s case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Western Midstream Partners, LP (NYSE:WES) is the least popular one with only 8 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 73.2. 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 gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately PLAN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PLAN were disappointed as the stock returned -1.1% since the end of the first quarter (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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