In this article we are going to use hedge fund sentiment as a tool and determine whether American Eagle Outfitters Inc. (NYSE:AEO) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is American Eagle Outfitters Inc. (NYSE:AEO) the right investment to pursue these days? Money managers were taking an optimistic view. The number of bullish hedge fund bets increased by 4 recently. American Eagle Outfitters Inc. (NYSE:AEO) was in 43 hedge funds’ portfolios at the end of March. The all time high for this statistic was 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AEO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 39 hedge funds in our database with AEO holdings at the end of December.
To the average investor there are numerous gauges market participants use to evaluate stocks. A duo of the most useful gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top money managers can outclass their index-focused peers by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Kerr Neilson of Platinum Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. With all of this in mind let’s take a gander at the latest hedge fund action surrounding American Eagle Outfitters Inc. (NYSE:AEO).
Do Hedge Funds Think AEO Is A Good Stock To Buy Now?
At the end of March, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 26 hedge funds with a bullish position in AEO a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Atreides Management, managed by Gavin Baker, holds the largest position in American Eagle Outfitters Inc. (NYSE:AEO). Atreides Management has a $198.6 million position in the stock, comprising 4.5% of its 13F portfolio. The second largest stake is held by Robert Joseph Caruso of Select Equity Group, with a $142.1 million position; 0.5% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish comprise Kerr Neilson’s Platinum Asset Management, Jack Woodruff’s Candlestick Capital Management and Gabriel Plotkin’s Melvin Capital Management. In terms of the portfolio weights assigned to each position Verdad Advisers allocated the biggest weight to American Eagle Outfitters Inc. (NYSE:AEO), around 5.87% of its 13F portfolio. Atreides Management is also relatively very bullish on the stock, designating 4.46 percent of its 13F equity portfolio to AEO.
As one would reasonably expect, specific money managers were breaking ground themselves. Select Equity Group, managed by Robert Joseph Caruso, created the most valuable position in American Eagle Outfitters Inc. (NYSE:AEO). Select Equity Group had $142.1 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also made a $69 million investment in the stock during the quarter. The other funds with brand new AEO positions are David Thomas’s Atalan Capital, Steven Boyd’s Armistice Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s go over hedge fund activity in other stocks similar to American Eagle Outfitters Inc. (NYSE:AEO). These stocks are AppFolio Inc (NASDAQ:APPF), Graphic Packaging Holding Company (NYSE:GPK), Hawaiian Electric Industries, Inc. (NYSE:HE), SL Green Realty Corp (NYSE:SLG), Science Applications International Corp (NYSE:SAIC), Curtiss-Wright Corp. (NYSE:CW), and Nomad Foods Limited (NYSE:NOMD). This group of stocks’ market caps match AEO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APPF | 12 | 394366 | -7 |
| GPK | 21 | 476673 | -5 |
| HE | 12 | 196022 | -6 |
| SLG | 21 | 162062 | -1 |
| SAIC | 18 | 207548 | -10 |
| CW | 22 | 208527 | -1 |
| NOMD | 25 | 324331 | -3 |
| Average | 18.7 | 281361 | -4.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $281 million. That figure was $948 million in AEO’s case. Nomad Foods Limited (NYSE:NOMD) is the most popular stock in this table. On the other hand AppFolio Inc (NASDAQ:APPF) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks American Eagle Outfitters Inc. (NYSE:AEO) is more popular among hedge funds. Our overall hedge fund sentiment score for AEO is 89. 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. 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 returned 17.4% in 2021 through June 18th but still managed to beat the market by 6.1 percentage points. Hedge funds were also right about betting on AEO as the stock returned 13.2% since the end of March (through 6/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
