Aeroflex Holding Corp. (NYSE:ARX) shareholders have witnessed an increase in activity from the world's largest hedge funds lately.
According to most stock holders, hedge funds are seen as underperforming, outdated financial tools of yesteryear. While there are more than 8000 funds trading at present, we look at the upper echelon of this group, close to 450 funds. It is widely believed that this group oversees most of the hedge fund industry's total capital, and by keeping an eye on their highest performing picks, we have spotted a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Just as integral, positive insider trading activity is a second way to parse down the stock market universe. There are a variety of stimuli for a bullish insider to drop shares of his or her company, but only one, very simple reason why they would buy. Various academic studies have demonstrated the valuable potential of this method if piggybackers understand where to look (learn more here).
With all of this in mind, it's important to take a gander at the latest action regarding Aeroflex Holding Corp. (NYSE:ARX).
Heading into Q2, a total of 10 of the hedge funds we track held long positions in this stock, a change of 25% from the previous quarter. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes substantially.
Of the funds we track, Alan Fournier's Pennant Capital Management had the most valuable position in Aeroflex Holding Corp. (NYSE:ARX), worth close to $36.3 million, accounting for 0.7% of its total 13F portfolio. The second largest stake is held by Matthew Knauer and Mina Faltas of Nokota Management, with a $13.4 million position; 0.7% of its 13F portfolio is allocated to the company. Other peers that are bullish include Matt Sirovich and Jeremy Mindich's Scopia Capital, Ken Griffin's Citadel Investment Group and Joel Greenblatt's Gotham Asset Management.
As aggregate interest increased, key hedge funds have been driving this bullishness. Central Square Management, managed by Kelly Cardwell, initiated the most outsized position in Aeroflex Holding Corp. (NYSE:ARX). Central Square Management had 0.4 million invested in the company at the end of the quarter. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk's GRT Capital Partners also made a $0.3 million investment in the stock during the quarter.
Bullish insider trading is particularly usable when the company in focus has experienced transactions within the past six months. Over the latest six-month time period, Aeroflex Holding Corp. (NYSE:ARX) has seen 2 unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let's go over hedge fund and insider activity in other stocks similar to Aeroflex Holding Corp. (NYSE:ARX). These stocks are Cabot Microelectronics Corporation (NASDAQ:CCMP), OmniVision Technologies, Inc. (NASDAQ:OVTI), Amkor Technology, Inc. (NASDAQ:AMKR), Micrel, Incorporated (NASDAQ:MCRL), and EZchip Semiconductor Ltd. (NASDAQ:EZCH). All of these stocks are in the semiconductor - integrated circuits industry and their market caps are closest to ARX's market cap.