Is Aircastle Limited (NYSE:AYR) undervalued? The smart money is taking a bullish view. The number of long hedge fund positions inched up by 2 recently.
If you'd ask most market participants, hedge funds are perceived as underperforming, old financial vehicles of the past. While there are over 8000 funds in operation at present, we choose to focus on the crème de la crème of this club, close to 450 funds. It is widely believed that this group oversees the majority of the smart money's total capital, and by watching their highest performing picks, we have unearthed a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Equally as important, positive insider trading activity is a second way to break down the investments you're interested in. Obviously, there are plenty of reasons for a bullish insider to sell shares of his or her company, but only one, very obvious reason why they would behave bullishly. Plenty of academic studies have demonstrated the impressive potential of this method if investors understand where to look (learn more here).
Consequently, let's take a glance at the key action encompassing Aircastle Limited (NYSE:AYR).
At the end of the first quarter, a total of 18 of the hedge funds we track were long in this stock, a change of 13% from the previous quarter. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably.
Of the funds we track, David Dreman's Dreman Value Management had the most valuable position in Aircastle Limited (NYSE:AYR), worth close to $30.6 million, comprising 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Goodnow Investment Group, managed by Edward Goodnow, which held a $27.1 million position; the fund has 5.8% of its 13F portfolio invested in the stock. Other peers with similar optimism include Debra Fine's Fine Capital Partners, Cliff Asness's AQR Capital Management and Zac Hirzel's Hirzel Capital Management.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Aircastle Limited (NYSE:AYR) headfirst. AQR Capital Management, managed by Cliff Asness, created the most valuable position in Aircastle Limited (NYSE:AYR). AQR Capital Management had 19 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Ken Gray and Steve Walsh's Bryn Mawr Capital.
Bullish insider trading is particularly usable when the company in focus has seen transactions within the past half-year. Over the last half-year time period, Aircastle Limited (NYSE:AYR) has experienced 1 unique insiders purchasing, and 2 insider sales (see the details of insider trades here).
Let's go over hedge fund and insider activity in other stocks similar to Aircastle Limited (NYSE:AYR). These stocks are Fly Leasing Ltd(ADR) (NYSE:FLY), seacube container leasing ltd (NYSE:BOX), TAL International Group, Inc. (NYSE:TAL), CAI International Inc (NYSE:CAP), and McGrath RentCorp (NASDAQ:MGRC). All of these stocks are in the rental & leasing services industry and their market caps are similar to AYR's market cap.