At Insider Monkey we follow around 700 of the best-performing investors and even though many of them lost money in the last couple of months (70% of hedge funds lost money in October whereas S&P 500 ETF lost about 7%), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a gander at the fresh hedge fund action regarding AAR Corp. (NYSE:AIR).
Hedge fund activity in AAR Corp. (NYSE:AIR)
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in AIR over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fisher Asset Management was the largest shareholder of AAR Corp. (NYSE:AIR), with a stake worth $46.8 million reported as of the end of September. Trailing Fisher Asset Management was Marshall Wace LLP, which amassed a stake valued at $15.6 million. Beach Point Capital Management, Citadel Investment Group, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in AAR Corp. (NYSE:AIR). Marshall Wace LLP had $15.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $7.5 million position during the quarter. The following funds were also among the new AIR investors: Jim Simons’s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and D. E. Shaw’s D E Shaw.
Let’s go over hedge fund activity in other stocks similar to AAR Corp. (NYSE:AIR). We will take a look at Acacia Communications, Inc. (NASDAQ:ACIA), NBT Bancorp Inc. (NASDAQ:NBTB), Big Lots, Inc. (NYSE:BIG), and Bitauto Hldg Ltd (NYSE:BITA). This group of stocks’ market caps match AIR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $122 million in AIR’s case. Big Lots, Inc. (NYSE:BIG) is the most popular stock in this table. On the other hand Bitauto Hldg Ltd (NYSE:BITA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks AAR Corp. (NYSE:AIR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.