Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Adaptimmune Therapeutics plc (NASDAQ:ADAP).
Hedge fund interest in Adaptimmune Therapeutics plc (NASDAQ:ADAP) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Sunlands Technology Group (NYSE:STG), Haynes International, Inc. (NASDAQ:HAYN), and Kimball Electronics Inc (NASDAQ:KE) to gather more data points. Our calculations also showed that ADAP isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the fresh hedge fund action surrounding Adaptimmune Therapeutics plc (NASDAQ:ADAP).
Hedge fund activity in Adaptimmune Therapeutics plc (NASDAQ:ADAP)
Heading into the third quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options 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.
According to Insider Monkey's hedge fund database, Matrix Capital Management, managed by David Goel and Paul Ferri, holds the most valuable position in Adaptimmune Therapeutics plc (NASDAQ:ADAP). Matrix Capital Management has a $112.6 million position in the stock, comprising 2.1% of its 13F portfolio. Coming in second is GLG Partners, led by Noam Gottesman, holding a $7.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Samuel Isaly's OrbiMed Advisors, Israel Englander's Millennium Management and Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the second quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's check out hedge fund activity in other stocks similar to Adaptimmune Therapeutics plc (NASDAQ:ADAP). These stocks are Sunlands Technology Group (NYSE:STG), Haynes International, Inc. (NASDAQ:HAYN), Kimball Electronics Inc (NASDAQ:KE), and BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX). This group of stocks' market valuations match ADAP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STG,1,717,-1 HAYN,10,49146,2 KE,9,24740,-1 BCRX,14,140524,-5 Average,8.5,53782,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $138 million in ADAP's case. BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is the most popular stock in this table. On the other hand Sunlands Technology Group (NYSE:STG) is the least popular one with only 1 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. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -62.4% during the third quarter 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.
Disclosure: None. This article was originally published at Insider Monkey.