At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Appian Corporation (NASDAQ:APPN) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Appian Corporation (NASDAQ:APPN) a buy right now? The smart money was buying. The number of long hedge fund bets improved by 1 recently. Appian Corporation (NASDAQ:APPN) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 19. Our calculations also showed that APPN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Colin Moran of Abdiel Capital Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to take a glance at the recent hedge fund action surrounding Appian Corporation (NASDAQ:APPN).
How are hedge funds trading Appian Corporation (NASDAQ:APPN)?
At the end of June, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards APPN over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Abdiel Capital Advisors held the most valuable stake in Appian Corporation (NASDAQ:APPN), which was worth $413 million at the end of the third quarter. On the second spot was StackLine Partners which amassed $13.5 million worth of shares. D E Shaw, Athanor Capital, and Citadel Investment Group 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 Abdiel Capital Advisors allocated the biggest weight to Appian Corporation (NASDAQ:APPN), around 12.2% of its 13F portfolio. StackLine Partners is also relatively very bullish on the stock, earmarking 5.03 percent of its 13F equity portfolio to APPN.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Athanor Capital, managed by Parvinder Thiara, established the largest position in Appian Corporation (NASDAQ:APPN). Athanor Capital had $11.3 million invested in the company at the end of the quarter. Matthew L Pinz’s Pinz Capital also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new APPN investors: Michael Gelband’s ExodusPoint Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks similar to Appian Corporation (NASDAQ:APPN). These stocks are LG Display Co Ltd. (NYSE:LPL), Kinsale Capital Group, Inc. (NASDAQ:KNSL), Crane Co. (NYSE:CR), Advanced Drainage Systems Inc. (NYSE:WMS), Lithia Motors Inc (NYSE:LAD), Virgin Galactic Holdings, Inc. (NYSE:SPCE), and Stantec Inc. (NYSE:STN). This group of stocks’ market values are similar to APPN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LPL | 5 | 16158 | 1 |
| KNSL | 14 | 37234 | 7 |
| CR | 27 | 224559 | 1 |
| WMS | 24 | 582674 | -1 |
| LAD | 31 | 761672 | 4 |
| SPCE | 22 | 60327 | 10 |
| STN | 5 | 47552 | -7 |
| Average | 18.3 | 247168 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $468 million in APPN’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 5 bullish hedge fund positions. Appian Corporation (NASDAQ:APPN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for APPN is 59.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on APPN as the stock returned 26.3% in the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
