Hedge Funds Are Betting On AAR Corp. (AIR)

In this article we will take a look at whether hedge funds think AAR Corp. (NYSE:AIR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is AAR Corp. (NYSE:AIR) going to take off soon? Prominent investors were getting more optimistic. The number of long hedge fund bets increased by 5 recently. AAR Corp. (NYSE:AIR) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 23. Our calculations also showed that AIR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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Ken Fisher of Fisher Asset Management

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Do Hedge Funds Think AIR Is A Good Stock To Buy Now?

At first quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AIR over the last 23 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Rubric Capital Management was the largest shareholder of AAR Corp. (NYSE:AIR), with a stake worth $54.1 million reported as of the end of March. Trailing Rubric Capital Management was Fisher Asset Management, which amassed a stake valued at $27.4 million. Royce & Associates, GAMCO Investors, and Jade Capital Advisors 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 Rubric Capital Management allocated the biggest weight to AAR Corp. (NYSE:AIR), around 3.16% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, dishing out 2.32 percent of its 13F equity portfolio to AIR.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, established the most valuable position in AAR Corp. (NYSE:AIR). Balyasny Asset Management had $4.5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $2.5 million investment in the stock during the quarter. The other funds with brand new AIR positions are Michael Gelband’s ExodusPoint Capital, Greg Eisner’s Engineers Gate Manager, and Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks similar to AAR Corp. (NYSE:AIR). These stocks are Hyster-Yale Materials Handling Inc (NYSE:HY), Groupon Inc (NASDAQ:GRPN), CSG Systems International, Inc. (NASDAQ:CSGS), Studio City International Holdings Limited (NYSE:MSC), DermTech, Inc. (NASDAQ:DMTK), Meta Financial Group Inc. (NASDAQ:CASH), and G-III Apparel Group, Ltd. (NASDAQ:GIII). 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
HY 12 91388 2
GRPN 25 376177 -1
CSGS 23 141997 1
MSC 3 226997 0
DMTK 18 303148 4
CASH 14 109318 5
GIII 14 90292 -2
Average 15.6 191331 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $150 million in AIR’s case. Groupon Inc (NASDAQ:GRPN) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 3 bullish hedge fund positions. AAR Corp. (NYSE:AIR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AIR is 74.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately AIR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AIR were disappointed as the stock returned -12.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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