Hedge Funds Are Cashing Out Of Aerojet Rocketdyne Holdings Inc (AJRD)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).

Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) was in 29 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 36. There were 30 hedge funds in our database with AJRD holdings at the end of March. Our calculations also showed that AJRD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the new hedge fund action regarding Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).

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

At Q2’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in AJRD a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Steel Partners was the largest shareholder of Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), with a stake worth $190.7 million reported as of the end of June. Trailing Steel Partners was Magnetar Capital, which amassed a stake valued at $129.2 million. GAMCO Investors, Alpine Associates, and Millennium Management 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 48.87% of its 13F portfolio. Havens Advisors is also relatively very bullish on the stock, setting aside 5.98 percent of its 13F equity portfolio to AJRD.

Seeing as Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) has faced bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedgies that slashed their positions entirely by the end of the second quarter. It’s worth mentioning that Sander Gerber’s Hudson Bay Capital Management dropped the biggest investment of all the hedgies monitored by Insider Monkey, worth about $34.5 million in stock. Renaissance Technologies, also cut its stock, about $8.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). We will take a look at Schneider National, Inc. (NYSE:SNDR), Hancock Whitney Corporation (NASDAQ:HWC), Digitalbridge Group Inc (NYSE:DBRG), Editas Medicine, Inc. (NASDAQ:EDIT), Eastern Bankshares, Inc. (NASDAQ:EBC), Denbury Inc. (NYSE:DEN), and Southwest Gas Holdings, Inc. (NYSE:SWX). This group of stocks’ market caps match AJRD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNDR 20 122133 1
HWC 22 127792 7
DBRG 29 686986 4
EDIT 23 506626 -1
EBC 20 115205 6
DEN 29 996614 -1
SWX 19 145257 -4
Average 23.1 385802 1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $846 million in AJRD’s case. Digitalbridge Group Inc (NYSE:DBRG) is the most popular stock in this table. On the other hand Southwest Gas Holdings, Inc. (NYSE:SWX) is the least popular one with only 19 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. Our overall hedge fund sentiment score for AJRD is 78.2. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately AJRD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AJRD were disappointed as the stock returned -9.1% since the end of June (through 10/15) 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.