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Is Adaptimmune Therapeutics plc (ADAP) Going to Burn These Hedge Funds?

Reymerlyn Martin

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Adaptimmune Therapeutics plc (NASDAQ:ADAP)? The smart money sentiment can provide an answer to this question.

Is Adaptimmune Therapeutics plc (NASDAQ:ADAP) going to take off soon? Hedge funds are selling. The number of bullish hedge fund bets were trimmed by 2 in recent months. Our calculations also showed that ADAP isn't among the 30 most popular stocks among hedge funds. ADAP was in 10 hedge funds' portfolios at the end of March. There were 12 hedge funds in our database with ADAP positions at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Samuel Isaly Orbimed Advisors

We're going to take a look at the new hedge fund action regarding Adaptimmune Therapeutics plc (NASDAQ:ADAP).

What does smart money think about Adaptimmune Therapeutics plc (NASDAQ:ADAP)?

At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ADAP over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ADAP_jun2019

Among these funds, Matrix Capital Management held the most valuable stake in Adaptimmune Therapeutics plc (NASDAQ:ADAP), which was worth $120.4 million at the end of the first quarter. On the second spot was Millennium Management which amassed $11.1 million worth of shares. Moreover, OrbiMed Advisors, GLG Partners, and Rock Springs Capital Management were also bullish on Adaptimmune Therapeutics plc (NASDAQ:ADAP), allocating a large percentage of their portfolios to this stock.

Due to the fact that Adaptimmune Therapeutics plc (NASDAQ:ADAP) has witnessed bearish sentiment from hedge fund managers, we can see that there was a specific group of fund managers that slashed their entire stakes by the end of the third quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management dumped the biggest investment of the 700 funds tracked by Insider Monkey, worth an estimated $3.3 million in call options. Israel Englander's fund, Millennium Management, also sold off its call options, about $1.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Adaptimmune Therapeutics plc (NASDAQ:ADAP) but similarly valued. We will take a look at PCM, Inc. (NASDAQ:PCMI), CVR Partners LP (NYSE:UAN), Gravity Co., LTD. (NASDAQ:GRVY), and Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP). This group of stocks' market caps resemble ADAP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCMI,17,40529,6 UAN,5,43910,1 GRVY,1,693,0 CRBP,9,47522,3 Average,8,33164,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $152 million in ADAP's case. PCM, Inc. (NASDAQ:PCMI) is the most popular stock in this table. On the other hand Gravity Co., LTD. (NASDAQ:GRVY) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 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 -19.5% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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

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