Were Hedge Funds Right About Piling Into Anaplan, Inc. (PLAN)?
How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Anaplan, Inc. (NYSE:PLAN) and determine whether hedge funds had an edge regarding this stock.
Is Anaplan, Inc. (NYSE:PLAN) the right investment to pursue these days? The best stock pickers were getting less bullish. The number of long hedge fund bets retreated by 6 lately. Our calculations also showed that PLAN 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_670377" align="aligncenter" width="400"]
Aaron Cowen of Suvretta Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. 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 gold prices. So, we are checking out this junior gold mining stock. 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 take a glance at the key hedge fund action regarding Anaplan, Inc. (NYSE:PLAN).
How are hedge funds trading Anaplan, Inc. (NYSE:PLAN)?
Heading into the second quarter of 2020, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the fourth quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in PLAN 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.
More specifically, Coatue Management was the largest shareholder of Anaplan, Inc. (NYSE:PLAN), with a stake worth $336.2 million reported as of the end of September. Trailing Coatue Management was Tiger Global Management LLC, which amassed a stake valued at $205.8 million. D1 Capital Partners, Melvin Capital Management, and Steadfast Capital 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 Cowbird Capital allocated the biggest weight to Anaplan, Inc. (NYSE:PLAN), around 6.88% of its 13F portfolio. HMI Capital is also relatively very bullish on the stock, setting aside 6.39 percent of its 13F equity portfolio to PLAN.
Due to the fact that Anaplan, Inc. (NYSE:PLAN) has witnessed a decline in interest from hedge fund managers, it's safe to say that there lies a certain "tier" of fund managers who were dropping their positions entirely in the first quarter. It's worth mentioning that Gregg Moskowitz's Interval Partners said goodbye to the largest position of the 750 funds watched by Insider Monkey, comprising about $55.2 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund sold off about $31.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 6 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Anaplan, Inc. (NYSE:PLAN) but similarly valued. These stocks are Xerox Holdings Corporation (NYSE:XRX), Autoliv Inc. (NYSE:ALV), Black Hills Corporation (NYSE:BKH), and Virtu Financial Inc (NASDAQ:VIRT). This group of stocks' market values are closest to PLAN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XRX,41,872768,2 ALV,15,366576,-6 BKH,18,170302,-6 VIRT,17,72830,2 Average,22.75,370619,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $371 million. That figure was $1608 million in PLAN's case. Xerox Holdings Corporation (NYSE:XRX) is the most popular stock in this table. On the other hand Autoliv Inc. (NYSE:ALV) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Anaplan, Inc. (NYSE:PLAN) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on PLAN as the stock returned 49.7% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
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