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Hedge Funds Aren’t Crazy About AerCap Holdings N.V. (AER) At All

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 second 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 5 years and analyze what the smart money thinks of AerCap Holdings N.V. (NYSE:AER) based on that data and determine whether they were really smart about the stock.

AerCap Holdings N.V. (NYSE:AER) investors should pay attention to a decrease in support from the world’s most elite money managers of late. AerCap Holdings N.V. (NYSE:AER) was in 30 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 77. Our calculations also showed that AER isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Boykin Curry EAGLE CAPITAL MANAGEMENT

Boykin Curry of Eagle Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a gander at the latest hedge fund action encompassing AerCap Holdings N.V. (NYSE:AER).

Hedge fund activity in AerCap Holdings N.V. (NYSE:AER)

At Q2’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AER over the last 20 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, Eagle Capital Management was the largest shareholder of AerCap Holdings N.V. (NYSE:AER), with a stake worth $262.2 million reported as of the end of September. Trailing Eagle Capital Management was Lyrical Asset Management, which amassed a stake valued at $160.1 million. Greenlight Capital, Hound Partners, and Citadel Investment Group 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 Elm Ridge Capital allocated the biggest weight to AerCap Holdings N.V. (NYSE:AER), around 12.93% of its 13F portfolio. Greenlight Capital is also relatively very bullish on the stock, dishing out 11.75 percent of its 13F equity portfolio to AER.

Due to the fact that AerCap Holdings N.V. (NYSE:AER) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that elected to cut their positions entirely by the end of the second quarter. It’s worth mentioning that Craig Peskin and Peter Fleiss’s Solel Partners cut the largest position of the “upper crust” of funds followed by Insider Monkey, valued at close to $4.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $3.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds by the end of the second quarter.

Let’s go over hedge fund activity in other stocks similar to AerCap Holdings N.V. (NYSE:AER). These stocks are Manpowergroup Inc (NYSE:MAN), Integra Lifesciences Holdings Corp (NASDAQ:IART), Darling Ingredients Inc. (NYSE:DAR), BOK Financial Corporation (NASDAQ:BOKF), Wyndham Hotels & Resorts, Inc. (NYSE:WH), Huntsman Corporation (NYSE:HUN), and Qurate Retail, Inc. (NASDAQ:QRTEA). This group of stocks’ market caps match AER’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAN 34 377077 11
IART 23 101326 1
DAR 25 403765 0
BOKF 17 203603 -5
WH 36 760057 5
HUN 25 354992 4
QRTEA 43 743396 11
Average 29 420602 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $421 million. That figure was $935 million in AER’s case. Qurate Retail, Inc. (NASDAQ:QRTEA) is the most popular stock in this table. On the other hand BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 17 bullish hedge fund positions. AerCap Holdings N.V. (NYSE:AER) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AER is 39.7. 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 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 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately AER wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AER were disappointed as the stock returned -6.4% 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.