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Did Hedge Funds Drop The Ball On Aircastle Limited (AYR) ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Aircastle Limited (NYSE:AYR).

Hedge fund interest in Aircastle Limited (NYSE:AYR) 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 AYR to other stocks including ForeScout Technologies, Inc. (NASDAQ:FSCT), Redwood Trust, Inc. (NYSE:RWT), and IAMGOLD Corporation (NYSE:IAG) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are assumed to be worthless, outdated financial tools of the past. While there are more than 8000 funds with their doors open at present, We look at the upper echelon of this club, around 750 funds. It is estimated that this group of investors preside over most of the hedge fund industry’s total asset base, and by shadowing their highest performing picks, Insider Monkey has unearthed several investment strategies that have historically defeated the market. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

AYR_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the fresh hedge fund action encompassing Aircastle Limited (NYSE:AYR).

What have hedge funds been doing with Aircastle Limited (NYSE:AYR)?

At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AYR over the last 16 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.

Ric Dillon Diamond Hill Capital

More specifically, Diamond Hill Capital was the largest shareholder of Aircastle Limited (NYSE:AYR), with a stake worth $44.8 million reported as of the end of March. Trailing Diamond Hill Capital was Goodnow Investment Group, which amassed a stake valued at $21 million. Arrowstreet Capital, Renaissance Technologies, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Aircastle Limited (NYSE:AYR) has faced declining sentiment from the smart money, it’s safe to say that there were a few money managers that slashed their positions entirely last quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management sold off the biggest stake of the 750 funds followed by Insider Monkey, valued at about $0.3 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Aircastle Limited (NYSE:AYR) but similarly valued. These stocks are ForeScout Technologies, Inc. (NASDAQ:FSCT), Redwood Trust, Inc. (NYSE:RWT), IAMGOLD Corporation (NYSE:IAG), and Visteon Corp (NASDAQ:VC). This group of stocks’ market values resemble AYR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FSCT 18 191567 -5
RWT 13 97744 -2
IAG 15 150001 2
VC 17 281647 -4
Average 15.75 180240 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $78 million in AYR’s case. ForeScout Technologies, Inc. (NASDAQ:FSCT) is the most popular stock in this table. On the other hand Redwood Trust, Inc. (NYSE:RWT) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Aircastle Limited (NYSE:AYR) is even less popular than RWT. Hedge funds clearly dropped the ball on AYR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on AYR as the stock returned 7% during the third quarter and outperformed the market by an even larger margin.

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

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