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Hedge Funds Are Crazy About AAR Corp. (AIR)

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AAR Corp. (NYSE:AIR) has seen an increase in hedge fund interest of late.

AAR Corp. (NYSE:AIR)To most shareholders, hedge funds are assumed to be slow, outdated investment vehicles of yesteryear. While there are over 8000 funds trading at present, we at Insider Monkey hone in on the crème de la crème of this club, close to 450 funds. It is widely believed that this group controls most of the smart money’s total capital, and by tracking their top picks, we have uncovered a few investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as beneficial, positive insider trading activity is a second way to parse down the investments you’re interested in. Obviously, there are many incentives for an executive to drop shares of his or her company, but just one, very clear reason why they would behave bullishly. Several empirical studies have demonstrated the valuable potential of this method if you understand where to look (learn more here).

Keeping this in mind, it’s important to take a gander at the recent action regarding AAR Corp. (NYSE:AIR).

How have hedgies been trading AAR Corp. (NYSE:AIR)?

At the end of the first quarter, a total of 18 of the hedge funds we track held long positions in this stock, a change of 20% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes significantly.

According to our comprehensive database, Diamond Hill Capital, managed by Ric Dillon, holds the biggest position in AAR Corp. (NYSE:AIR). Diamond Hill Capital has a $17.5 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Millennium Management, managed by Israel Englander, which held a $6.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and Joel Greenblatt’s Gotham Asset Management.

As industrywide interest jumped, specific money managers have jumped into AAR Corp. (NYSE:AIR) headfirst. Highbridge Capital Management, managed by Glenn Russell Dubin, assembled the biggest position in AAR Corp. (NYSE:AIR). Highbridge Capital Management had 2.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new AIR investors: David Costen Haley’s HBK Investments and Mike Vranos’s Ellington.

What have insiders been doing with AAR Corp. (NYSE:AIR)?

Insider trading activity, especially when it’s bullish, is best served when the primary stock in question has seen transactions within the past half-year. Over the last 180-day time frame, AAR Corp. (NYSE:AIR) has experienced zero unique insiders buying, and 3 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to AAR Corp. (NYSE:AIR). These stocks are Astronics Corporation (NASDAQ:ATRO), Orbital Sciences Corp (NYSE:ORB), Sturm, Ruger & Company (NYSE:RGR), Kaman Corporation (NYSE:KAMN), and Smith & Wesson Holding Corporation (NASDAQ:SWHC). This group of stocks are the members of the aerospace/defense products & services industry and their market caps resemble AIR’s market cap.

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