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Hedge Funds Are Dumping Applied Industrial Technologies Inc (AIT)

In this article we will take a look at whether hedge funds think Applied Industrial Technologies Inc (NYSE:AIT) 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 Applied Industrial Technologies Inc (NYSE:AIT) a buy right now? The best stock pickers are selling. The number of long hedge fund bets retreated by 8 lately. Our calculations also showed that AIT 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). AIT was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. There were 22 hedge funds in our database with AIT positions at the end of the previous quarter.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the key hedge fund action regarding Applied Industrial Technologies Inc (NYSE:AIT).

How have hedgies been trading Applied Industrial Technologies Inc (NYSE:AIT)?

At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AIT over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AIT A Good Stock To Buy?

The largest stake in Applied Industrial Technologies Inc (NYSE:AIT) was held by Carlson Capital, which reported holding $10.2 million worth of stock at the end of September. It was followed by Royce & Associates with a $9.5 million position. Other investors bullish on the company included Adage Capital Management, Value Holdings LP, and PDT Partners. In terms of the portfolio weights assigned to each position Value Holdings LP allocated the biggest weight to Applied Industrial Technologies Inc (NYSE:AIT), around 2.04% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.94 percent of its 13F equity portfolio to AIT.

Since Applied Industrial Technologies Inc (NYSE:AIT) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there were a few hedge funds that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Noam Gottesman’s GLG Partners dropped the largest stake of the 750 funds monitored by Insider Monkey, worth an estimated $14 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dropped its stock, about $11.6 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 8 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Applied Industrial Technologies Inc (NYSE:AIT) but similarly valued. These stocks are National Storage Affiliates Trust (NYSE:NSA), Fitbit Inc (NYSE:FIT), Rogers Corporation (NYSE:ROG), and Vonage Holdings Corp. (NYSE:VG). All of these stocks’ market caps match AIT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NSA 18 77143 7
FIT 26 273167 2
ROG 19 77338 -2
VG 25 206818 -10
Average 22 158617 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $36 million in AIT’s case. Fitbit Inc (NYSE:FIT) is the most popular stock in this table. On the other hand National Storage Affiliates Trust (NYSE:NSA) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Applied Industrial Technologies Inc (NYSE:AIT) is even less popular than NSA. Hedge funds clearly dropped the ball on AIT as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on AIT as the stock returned 31.9% so far in the second quarter and outperformed the market by an even larger margin.

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