The uncertainty of capital markets has been an elusive beast many have tried and failed to tame. Currently, earnings season has all but drawn to a close, and investors are looking to the holiday season and end of Fiscal Year 2021 for what is to come.
Day-to-day headlines may affect stocks in the short term, but long-term macro forces and fundamentally shifting trends are what drives, or weighs down, the places people put their money.
While any investor must conduct their own due diligence before deciding on a stock, there are organizations known as hedge funds whose sole role is to outperform the market. Investors can typically turn to their stock picks for insight. However, after applying an alternative value investing strategy, one fund in particular has underperformed for years and is only now seeing its fate turn around.
AQR Capital Management developed a signature quantitative method for picking stocks, which saw success until the summer of 2018, at which point, the fund has declined about 30% to-date. After about a year of recovering returns, the firm still decided to recently trim its senior management and restructure some of its branches. Also known as Applied Quantitative Research, AQR manages about $164,441,363,267, and thus, is one of the world’s largest hedge funds in operation.
The Greenwich, Connecticut-based firm is run by billionaire co-founder and CIO Clifford Asness, who himself has an estimated net worth of about $1.4 billion. Although his firm saw declines as value investing fell out of favor with the rest of the market, the man clearly knows how to make a buck. Asness and Co. have steered the firm back on track and AQR is now experiencing a recovery.
The question stands however, how does any of this help the average investor? Well, hedge funds must submit a quarterly report called the 13F filing to the Securities and Exchange Commission (SEC). This discloses most long positions to public record, and is meant to allow transparency into the financial system.
Taking all this into consideration, we examined two stocks in which which AQR thought were worthy of an investment in the last quarter.
Apellis Pharmaceuticals (APLS)
The Massachusetts-based company focuses on treatments for patients with paroxysmal nocturnal hemoglobinuria (PNS), a rare and life-threatening disease of the blood, among others.
Following FDA approval, APLS has successfully launched Empaveli, which fights against PNS. Several other drugs and treatments remain at differing stages of its pipeline, with one in Phase 3 and approaching commercial release.
The stock had been increasing in valuation significantly up until September of 2021, at which point Apellis reported mixed data from some of its clinical studies. In reaction to the report, APLS immediately fell about 40%, and has only recently recovered about half of that. It appears that the sell-off has provided those with an interest in the stock a much more attractive entry point, with insiders and hedge funds buying in.
This past quarter, AQR Capital Management opened a sizeable position in the pharma company. Predicting the outcomes of FDA trials and timing price action in healthcare stocks can be an exceedingly tricky thing to do. However, it appears that Asness and his team have deduced quantitative upside in Apellis.
The hedge fund picked up 36,478 shares of APLS, amounting to a market value of $1.35 million. For AQR, this was an 812% change in its holding position, and indicates a strong degree of confidence in the stock. Considering the market value of the shares today equals approximately $1.59 million, the trade has already started to pay off for Asness and Co.
Moreover, AQR isn’t the only bull on the street. Anupam Rama of J.P. Morgan recently spelled out his optimistic hypothesis on the stock, writing “Apellis’s lead asset, Empaveli (pegcetacoplan / APL-2), represents a differentiated asset in the complement space, with opportunities in a broad range of hematology, neurology, and nephrology indications.”
Rama went on to argue that APLS has made “strong progress on the overall pipeline,” and is well-poised for upside.
The four-star analyst rated the stock a Buy, and assigned a price target of $58 per share.
On TipRanks, the tone is similar. The analyst rating consensus is a Strong Buy, based on 11 Buy and two Hold ratings. The average Apellis price target is $68.42 per share.
LeMaitre Vascular (LMAT)
This medical device company engages in the development of treatments for peripheral vascular disease, among several other similar ailments. Based in Massachusetts, LMAT produces, sells, and distributes prosthetic vascular tools for surgeons and hospitals.
Over the last year, the stock has seen its price rise 23.3%, although it seems there are multiple positive supporters which believe it has room to run. AQR purchased 18,270 shares of LeMaitre in Q3, amounting to a total value of $925,000. This was a significant increase in the funds’ holding position, which prior to the transaction was 3,324 shares.
LMAT has seen its share price slump almost 8% over the last week.
Michael Petusky of Barrington Research declared his encouraging opinion on the company as well, stating that the company “intends to continue to invest in its sales force and currently expects its sales force to grow… over the next several months.”
The four-star analyst went on to write that “the company has had a strong history of augmenting its organic growth with contributions from M&A activity.”
Petusky rated the stock a Buy, and calculated a price target of $62.
The rest of Wall Street was equal in sentiment, with the analyst rating consensus on TipRanks reading a Strong Buy for LeMaitre. Furthermore, the average LeMaitre price target is $67.33.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.
