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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Adaptimmune Therapeutics plc (NASDAQ:ADAP) based on that data.
Is ADAP a good stock to buy now? Adaptimmune Therapeutics plc (NASDAQ:ADAP) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 19. ADAP investors should be aware of a decrease in hedge fund interest recently. There were 19 hedge funds in our database with ADAP positions at the end of the second quarter. Our calculations also showed that ADAP isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Michael Gelband of ExodusPoint Capital
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to take a peek at the recent hedge fund action encompassing Adaptimmune Therapeutics plc (NASDAQ:ADAP).
Do Hedge Funds Think ADAP Is A Good Stock To Buy Now?
At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in ADAP 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.
When looking at the institutional investors followed by Insider Monkey, Matrix Capital Management, managed by David Goel and Paul Ferri, holds the largest position in Adaptimmune Therapeutics plc (NASDAQ:ADAP). Matrix Capital Management has a $311 million position in the stock, comprising 4.1% of its 13F portfolio. The second most bullish fund manager is RA Capital Management, led by Peter Kolchinsky, holding a $90.4 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish contain Behzad Aghazadeh's Avoro Capital Advisors (venBio Select Advisor), Julian Baker and Felix Baker's Baker Bros. Advisors and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Matrix Capital Management allocated the biggest weight to Adaptimmune Therapeutics plc (NASDAQ:ADAP), around 4.13% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, designating 1.65 percent of its 13F equity portfolio to ADAP.
Seeing as Adaptimmune Therapeutics plc (NASDAQ:ADAP) has faced declining sentiment from the smart money, logic holds that there was a specific group of funds that slashed their full holdings by the end of the third quarter. Intriguingly, Manfred Yu's Acuta Capital Partners cut the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $11.7 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $3.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks similar to Adaptimmune Therapeutics plc (NASDAQ:ADAP). These stocks are Constellium SE (NYSE:CSTM), Marcus & Millichap Inc (NYSE:MMI), Cadence Bancorporation (NYSE:CADE), The Pennant Group, Inc. (NASDAQ:PNTG), Linx S.A. (NYSE:LINX), Kaman Corporation (NYSE:KAMN), and NextPoint Residential Trust Inc (NYSE:NXRT). This group of stocks' market valuations are closest to ADAP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSTM,30,180519,-2 MMI,5,67635,-3 CADE,22,110929,1 PNTG,15,30509,5 LINX,5,33977,2 KAMN,12,138073,-1 NXRT,9,69227,-4 Average,14,90124,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $648 million in ADAP's case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand Marcus & Millichap Inc (NYSE:MMI) is the least popular one with only 5 bullish hedge fund positions. Adaptimmune Therapeutics plc (NASDAQ:ADAP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADAP is 53.8. 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. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately ADAP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ADAP were disappointed as the stock returned -48.6% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.