The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at American Outdoor Brands Corporation (NASDAQ:AOBC) from the perspective of those elite funds.
American Outdoor Brands Corporation (NASDAQ:AOBC) investors should pay attention to an increase in hedge fund sentiment in recent months. AOBC was in 19 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with AOBC positions at the end of the previous quarter. Our calculations also showed that AOBC isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s review the key hedge fund action regarding American Outdoor Brands Corporation (NASDAQ:AOBC).
What have hedge funds been doing with American Outdoor Brands Corporation (NASDAQ:AOBC)?
Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in AOBC over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of American Outdoor Brands Corporation (NASDAQ:AOBC), with a stake worth $32.6 million reported as of the end of September. Trailing D E Shaw was Millennium Management, which amassed a stake valued at $31.3 million. Renaissance Technologies, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers have jumped into American Outdoor Brands Corporation (NASDAQ:AOBC) headfirst. Renaissance Technologies, managed by Jim Simons, assembled the most valuable position in American Outdoor Brands Corporation (NASDAQ:AOBC). Renaissance Technologies had $19.3 million invested in the company at the end of the quarter. Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital also initiated a $0.5 million position during the quarter. The following funds were also among the new AOBC investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Guy Shahar’s DSAM Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as American Outdoor Brands Corporation (NASDAQ:AOBC) but similarly valued. We will take a look at CalAmp Corp. (NASDAQ:CAMP), Global Cord Blood Corporation (NYSE:CO), CSW Industrials, Inc. (NASDAQ:CSWI), and Urstadt Biddle Properties Inc (NYSE:UBA). This group of stocks’ market caps are closest to AOBC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAMP | 17 | 63050 | 0 |
| CO | 7 | 31573 | -2 |
| CSWI | 10 | 50481 | -4 |
| UBA | 8 | 29284 | -1 |
| Average | 10.5 | 43597 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $113 million in AOBC’s case. CalAmp Corp. (NASDAQ:CAMP) is the most popular stock in this table. On the other hand China Cord Blood Corp (NYSE:CO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks American Outdoor Brands Corporation (NASDAQ:AOBC) 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.
