Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Aaron’s, Inc. (NYSE:AAN).
Aaron’s, Inc. (NYSE:AAN) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds’ portfolios at the end of the third quarter of 2016. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Agios Pharmaceuticals Inc (NASDAQ:AGIO), FIRSTSERVICE CORPORATION (TSE:FSV), and LogMeIn Inc (NASDAQ:LOGM) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
What does the smart money think about Aaron’s, Inc. (NYSE:AAN)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter and well off the stock’s ownership total of a year earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the most valuable position in Aaron’s, Inc. (NYSE:AAN), worth close to $100 million. Sitting at the No. 2 spot is First Pacific Advisors LLC, led by Robert Rodriguez and Steven Romick, holding a $58.8 million position. Other members of the smart money with similar optimism consist of D E Shaw, Mario Gabelli’s GAMCO Investors, and Cliff Asness’ AQR Capital Management.