We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Adaptimmune Therapeutics plc (NASDAQ:ADAP) and determine whether hedge funds skillfully traded this stock.
Adaptimmune Therapeutics plc (NASDAQ:ADAP) was in 11 hedge funds' portfolios at the end of March. ADAP has seen an increase in support from the world's most elite money managers of late. There were 9 hedge funds in our database with ADAP positions at the end of the previous quarter. Our calculations also showed that ADAP isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_261250" align="aligncenter" width="400"] Peter Kolchinsky of RA Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to review the latest hedge fund action surrounding Adaptimmune Therapeutics plc (NASDAQ:ADAP).
What have hedge funds been doing with Adaptimmune Therapeutics plc (NASDAQ:ADAP)?
At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in ADAP a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Matrix Capital Management held the most valuable stake in Adaptimmune Therapeutics plc (NASDAQ:ADAP), which was worth $93.6 million at the end of the third quarter. On the second spot was RA Capital Management which amassed $34.1 million worth of shares. Baker Bros. Advisors, OrbiMed Advisors, 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 Matrix Capital Management allocated the biggest weight to Adaptimmune Therapeutics plc (NASDAQ:ADAP), around 2.39% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, dishing out 1.08 percent of its 13F equity portfolio to ADAP.
As aggregate interest increased, specific money managers were breaking ground themselves. RA Capital Management, managed by Peter Kolchinsky, established the biggest position in Adaptimmune Therapeutics plc (NASDAQ:ADAP). RA Capital Management had $34.1 million invested in the company at the end of the quarter. Julian Baker and Felix Baker's Baker Bros. Advisors also made a $10 million investment in the stock during the quarter. The following funds were also among the new ADAP investors: Ken Griffin's Citadel Investment Group and Vishal Saluja and Pham Quang's Endurant Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Adaptimmune Therapeutics plc (NASDAQ:ADAP) but similarly valued. These stocks are Tuscan Holdings Corp. (NASDAQ:THCB), Merus N.V. (NASDAQ:MRUS), Triumph Group Inc (NYSE:TGI), and PDL BioPharma Inc. (NASDAQ:PDLI). This group of stocks' market values are similar to ADAP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position THCB,9,62865,-1 MRUS,11,132226,-2 TGI,18,38104,2 PDLI,14,77459,-5 Average,13,77664,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $163 million in ADAP's case. Triumph Group Inc (NYSE:TGI) is the most popular stock in this table. On the other hand Tuscan Holdings Corp. (NASDAQ:THCB) is the least popular one with only 9 bullish hedge fund positions. Adaptimmune Therapeutics plc (NASDAQ:ADAP) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on ADAP as the stock returned 268% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.