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Hedge Funds Are Nibbling On Aerojet Rocketdyne Holdings Inc (AJRD)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) based on that data.

Is Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) the right pick for your portfolio? Prominent investors are becoming more confident. 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Warren Lichtenstein Steel Partners

Warren Lichtenstein of Steel Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the fresh hedge fund action regarding Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).

What does smart money think about Aerojet Rocketdyne Holdings Inc (NYSE:AJRD)?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. 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 key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

The largest stake in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) was held by Steel Partners, which reported holding $165.2 million worth of stock at the end of September. It was followed by GAMCO Investors with a $149.7 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and D E Shaw. 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, earmarking 1.77 percent of its 13F equity portfolio to AJRD.

With a general bullishness amongst the heavyweights, some big names have jumped into Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) headfirst. Engineers Gate Manager, managed by Greg Eisner, created 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 initiated a $0.4 million position during the quarter. The other funds with brand new AJRD positions 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 – not necessarily in the same industry as Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) but similarly valued. 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 13.9% in 2020 through June 10th but beat the market by 14.2 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 5.6% 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.