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Hedge Funds Couldn’t Dump AnaptysBio, Inc. (ANAB) Fast Enough

Abigail Fisher

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was AnaptysBio, Inc. (NASDAQ:ANAB).

AnaptysBio, Inc. (NASDAQ:ANAB) was in 15 hedge funds' portfolios at the end of the third quarter of 2019. ANAB shareholders have witnessed a decrease in hedge fund sentiment lately. There were 16 hedge funds in our database with ANAB positions at the end of the previous quarter. Our calculations also showed that ANAB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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' 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

[caption id="attachment_735536" align="aligncenter" width="473"] Sander Gerber of Hudson Bay Capital Management[/caption]

Sander Gerber Hudson Bay Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to check out the new hedge fund action encompassing AnaptysBio, Inc. (NASDAQ:ANAB).

What have hedge funds been doing with AnaptysBio, Inc. (NASDAQ:ANAB)?

At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in ANAB 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, Adage Capital Management held the most valuable stake in AnaptysBio, Inc. (NASDAQ:ANAB), which was worth $94.3 million at the end of the third quarter. On the second spot was Frazier Healthcare Partners which amassed $81.1 million worth of shares. Millennium Management, Redmile Group, and Cormorant Asset Management 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 Frazier Healthcare Partners allocated the biggest weight to AnaptysBio, Inc. (NASDAQ:ANAB), around 25.34% of its 13F portfolio. Biotechnology Value Fund is also relatively very bullish on the stock, designating 1.3 percent of its 13F equity portfolio to ANAB.

Seeing as AnaptysBio, Inc. (NASDAQ:ANAB) has experienced a decline in interest from hedge fund managers, logic holds that there is a sect of money managers who sold off their full holdings in the third quarter. Interestingly, Ori Hershkovitz's Nexthera Capital said goodbye to the biggest investment of the "upper crust" of funds followed by Insider Monkey, comprising close to $0.7 million in stock, and Michael S. Weiss and Lindsay A. Rosenwald's Opus Point Partners Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let's now review hedge fund activity in other stocks similar to AnaptysBio, Inc. (NASDAQ:ANAB). These stocks are Urstadt Biddle Properties Inc (NYSE:UBA), So-Young International Inc. (NASDAQ:SY), Star Bulk Carriers Corp. (NASDAQ:SBLK), and HudBay Minerals Inc (NYSE:HBM). All of these stocks' market caps match ANAB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBA,11,36367,3 SY,2,31447,-3 SBLK,12,445578,1 HBM,13,136771,1 Average,9.5,162541,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $329 million in ANAB's case. HudBay Minerals Inc (NYSE:HBM) is the most popular stock in this table. On the other hand So-Young International Inc. (NASDAQ:SY) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks AnaptysBio, Inc. (NASDAQ:ANAB) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ANAB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ANAB were disappointed as the stock returned -61.4% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.

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

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