Hedge Funds Are Selling Great Ajax Corp (AJX)

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 Great Ajax Corp (NYSE:AJX) based on that data.

Great Ajax Corp (NYSE:AJX) investors should be aware of a decrease in hedge fund interest lately. AJX was in 6 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with AJX positions at the end of the previous quarter. Our calculations also showed that AJX 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).

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

David Harding

David Harding of Winton Capital Management

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 stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind we’re going to take a peek at the fresh hedge fund action regarding Great Ajax Corp (NYSE:AJX).

How are hedge funds trading Great Ajax Corp (NYSE:AJX)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the fourth quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in AJX a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is AJX A Good Stock To Buy?

Among these funds, Almitas Capital held the most valuable stake in Great Ajax Corp (NYSE:AJX), which was worth $4 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $0.9 million worth of shares. Ellington, D E Shaw, and Two Sigma 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 Almitas Capital allocated the biggest weight to Great Ajax Corp (NYSE:AJX), around 8.81% of its 13F portfolio. Ellington is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to AJX.

Since Great Ajax Corp (NYSE:AJX) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedge funds who sold off their full holdings last quarter. Interestingly, Jeffrey Hinkle’s Shoals Capital Management cut the largest stake of the 750 funds followed by Insider Monkey, worth an estimated $9.6 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $1.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Great Ajax Corp (NYSE:AJX) but similarly valued. We will take a look at Hersha Hospitality Trust (NYSE:HT), Evolus, Inc. (NASDAQ:EOLS), Bank of Commerce Holdings (NASDAQ:BOCH), and Investar Holding Corporation (NASDAQ:ISTR). This group of stocks’ market values are closest to AJX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HT 10 4305 -5
EOLS 12 30585 -3
BOCH 5 7941 -2
ISTR 7 14035 0
Average 8.5 14217 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $6 million in AJX’s case. Evolus, Inc. (NASDAQ:EOLS) is the most popular stock in this table. On the other hand Bank of Commerce Holdings (NASDAQ:BOCH) is the least popular one with only 5 bullish hedge fund positions. Great Ajax Corp (NYSE:AJX) is not the least popular stock in this group but hedge fund interest is still below average. 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 and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on AJX as the stock returned 54.2% during 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.