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Advanced Energy Industries, Inc. (AEIS): Hedge Fund Sentiment Unchanged

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Advanced Energy Industries, Inc. (NASDAQ:AEIS).

Hedge fund interest in Advanced Energy Industries, Inc. (NASDAQ:AEIS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare AEIS to other stocks including Evoqua Water Technologies Corp. (NYSE:AQUA), Independent Bank Group Inc (NASDAQ:IBTX), and Inter Parfums, Inc. (NASDAQ:IPAR) to get a better sense of its popularity.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

GOTHAM ASSET MANAGEMENT

Let’s take a glance at the new hedge fund action encompassing Advanced Energy Industries, Inc. (NASDAQ:AEIS).

What does the smart money think about Advanced Energy Industries, Inc. (NASDAQ:AEIS)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in AEIS heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

AEIS_dec2018

Among these funds, Renaissance Technologies held the most valuable stake in Advanced Energy Industries, Inc. (NASDAQ:AEIS), which was worth $86.9 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $44.7 million worth of shares. Moreover, AQR Capital Management, Gotham Asset Management, and D E Shaw were also bullish on Advanced Energy Industries, Inc. (NASDAQ:AEIS), allocating a large percentage of their portfolios to this stock.

Since Advanced Energy Industries, Inc. (NASDAQ:AEIS) has faced declining sentiment from the smart money, it’s safe to say that there is a sect of hedgies that elected to cut their entire stakes last quarter. Intriguingly, Kevin Oram and Peter Uddo’s Praesidium Investment Management Company dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, worth about $26.4 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $2.5 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Advanced Energy Industries, Inc. (NASDAQ:AEIS) but similarly valued. We will take a look at Evoqua Water Technologies Corp. (NYSE:AQUA), Independent Bank Group Inc (NASDAQ:IBTX), Inter Parfums, Inc. (NASDAQ:IPAR), and Banner Corporation (NASDAQ:BANR). All of these stocks’ market caps match AEIS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AQUA 11 42787 -1
IBTX 11 119938 1
IPAR 13 64895 0
BANR 20 109128 5
Average 13.75 84187 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $192 million in AEIS’s case. 0 is the most popular stock in this table. On the other hand Evoqua Water Technologies Corp. (NYSE:AQUA) is the least popular one with only 11 bullish hedge fund positions. Advanced Energy Industries, Inc. (NASDAQ:AEIS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BANR might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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