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 Astronics Corporation (NASDAQ:ATRO).
Astronics Corporation (NASDAQ:ATRO) has seen an increase in hedge fund sentiment of late. ATRO was in 9 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with ATRO holdings at the end of the previous quarter. At the end of this article we will also compare ATRO to other stocks including Q2 Holdings Inc (NYSE:QTWO), Tennant Company (NYSE:TNC), and Super Micro Computer, Inc. (NASDAQ:SMCI) to get a better sense of its popularity.
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.
patpitchaya/Shutterstock.com
With all of this in mind, we’re going to take a peek at the recent action encompassing Astronics Corporation (NASDAQ:ATRO).
How have hedgies been trading Astronics Corporation (NASDAQ:ATRO)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 13% from the second quarter of 2016. By comparison, 9 hedge funds held shares or bullish call options in ATRO heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Charles Paquelet’s Skylands Capital has the most valuable position in Astronics Corporation (NASDAQ:ATRO), worth close to $5.1 million, accounting for 0.8% of its total 13F portfolio. The second most bullish fund manager is David Brown of Hawk Ridge Management which holds a $4.1 million position; 2.2% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish encompass Chuck Royce’s Royce & Associates, Josh Goldberg’s G2 Investment Partners Management and Israel Englander’s Millennium Management which is one of the 10 largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Hawk Ridge Management initiated the biggest position in Astronics Corporation (NASDAQ:ATRO), followed by G2 Investment Partners Management, which made a $0.7 million investment in the stock during the quarter. The following funds were also among the new ATRO investors: Ken Griffin’s Citadel Investment Group and Paul Tudor Jones’ Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks similar to Astronics Corporation (NASDAQ:ATRO). We will take a look at Q2 Holdings Inc (NYSE:QTWO), Tennant Company (NYSE:TNC), Super Micro Computer, Inc. (NASDAQ:SMCI), and Oxford Industries, Inc. (NYSE:OXM). All of these stocks’ market caps resemble ATRO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QTWO | 12 | 36339 | -2 |
| TNC | 10 | 117320 | -2 |
| SMCI | 13 | 49744 | 3 |
| OXM | 15 | 123548 | 5 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $15 million in ATRO’s case. Oxford Industries, Inc. (NYSE:OXM) is the most popular stock in this table. On the other hand Tennant Company (NYSE:TNC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Astronics Corporation (NASDAQ:ATRO) is even less popular than TNC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
