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Did Hedge Funds Make The Right Call On Aerojet Rocketdyne Holdings Inc (AJRD) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) and determine whether the smart money was really smart about this stock.

Is Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) a first-rate stock to buy now? The best stock pickers were betting on the stock. The number of bullish hedge fund positions improved by 2 lately. Our calculations also showed that AJRD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). AJRD was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with AJRD holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are plenty of gauges shareholders have at their disposal to grade stocks. Some of the less known gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the market by a solid amount (see the details here).

Mario Gabelli of GAMCO Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).

How are hedge funds trading Aerojet Rocketdyne Holdings Inc (NYSE:AJRD)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AJRD over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is AJRD A Good Stock To Buy?

More specifically, Steel Partners was the largest shareholder of Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), with a stake worth $165.2 million reported as of the end of September. Trailing Steel Partners was GAMCO Investors, which amassed a stake valued at $149.7 million. Renaissance Technologies, Millennium Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Steel Partners allocated the biggest weight to Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), around 84.16% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 1.77 percent of its 13F equity portfolio to AJRD.

As industrywide interest jumped, some big names have been driving this bullishness. Engineers Gate Manager, managed by Greg Eisner, assembled the largest position in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). Engineers Gate Manager had $1.3 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management, Peter Muller’s PDT Partners, and Renee Yao’s Neo Ivy Capital.

Let’s also examine hedge fund activity in other stocks similar to Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). We will take a look at ADT Inc. (NYSE:ADT), Williams-Sonoma, Inc. (NYSE:WSM), Floor & Decor Holdings, Inc. (NYSE:FND), and Empire State Realty Trust Inc (NYSE:ESRT). This group of stocks’ market valuations resemble AJRD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADT 20 98631 -1
WSM 26 182192 -3
FND 23 400020 -4
ESRT 16 151926 -2
Average 21.25 208192 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $208 million. That figure was $423 million in AJRD’s case. Williams-Sonoma, Inc. (NYSE:WSM) is the most popular stock in this table. On the other hand Empire State Realty Trust Inc (NYSE:ESRT) is the least popular one with only 16 bullish hedge fund positions. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately AJRD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AJRD were disappointed as the stock returned -5.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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