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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Aptinyx Inc. (NASDAQ:APTX) makes for a good investment right now.
Is APTX a good stock to buy now? Hedge funds were in a pessimistic mood. The number of long hedge fund positions decreased by 1 recently. Aptinyx Inc. (NASDAQ:APTX) was in 7 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 18. Our calculations also showed that APTX 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.
Jim Simons of Renaissance Technologies
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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Keeping this in mind we're going to go over the fresh hedge fund action regarding Aptinyx Inc. (NASDAQ:APTX).
What have hedge funds been doing with Aptinyx Inc. (NASDAQ:APTX)?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in APTX 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.
The largest stake in Aptinyx Inc. (NASDAQ:APTX) was held by Adams Street Partners, which reported holding $17.9 million worth of stock at the end of September. It was followed by Frazier Healthcare Partners with a $10.8 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Ikarian Capital. In terms of the portfolio weights assigned to each position Adams Street Partners allocated the biggest weight to Aptinyx Inc. (NASDAQ:APTX), around 4.73% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, dishing out 0.97 percent of its 13F equity portfolio to APTX.
Due to the fact that Aptinyx Inc. (NASDAQ:APTX) has faced falling interest from the smart money, we can see that there exists a select few fund managers that slashed their entire stakes by the end of the third quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group said goodbye to the largest investment of the 750 funds followed by Insider Monkey, comprising about $0.1 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund said goodbye to about $0.1 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Aptinyx Inc. (NASDAQ:APTX). We will take a look at Premier Financial Bancorp, Inc. (NASDAQ:PFBI), CTI Biopharma Corp. (NASDAQ:CTIC), Montage Resources Corp (NYSE:MR), Lakeland Industries, Inc. (NASDAQ:LAKE), InnerWorkings, Inc. (NASDAQ:INWK), Consolidated Water Co. Ltd. (NASDAQ:CWCO), and First Choice Bancorp (NASDAQ:FCBP). All of these stocks' market caps are closest to APTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFBI,4,3181,2 CTIC,6,48701,-3 MR,14,15153,3 LAKE,12,29681,-2 INWK,14,14937,1 CWCO,8,12141,-1 FCBP,2,479,1 Average,8.6,17753,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.6 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $36 million in APTX's case. Montage Resources Corp (NYSE:MR) is the most popular stock in this table. On the other hand First Choice Bancorp (NASDAQ:FCBP) is the least popular one with only 2 bullish hedge fund positions. Aptinyx Inc. (NASDAQ:APTX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for APTX is 36.5. 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 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on APTX as the stock returned 10.7% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.