Hedge Funds Have Never Been This Bullish On Wesco Aircraft Holdings Inc (WAIR)

World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Is Wesco Aircraft Holdings Inc (NYSE:WAIR) a buy right now? Hedge funds are taking a bullish view. The number of bullish hedge fund bets went up by 5 in recent months. Our calculations also showed that wair isn’t among the 30 most popular stocks among hedge funds. WAIR was in 22 hedge funds’ portfolios at the end of the first quarter of 2019. There were 17 hedge funds in our database with WAIR positions at the end of the previous quarter.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Thomas Bancroft - Makaira Partners

We’re going to check out the new hedge fund action encompassing Wesco Aircraft Holdings Inc (NYSE:WAIR).

What have hedge funds been doing with Wesco Aircraft Holdings Inc (NYSE:WAIR)?

Heading into the second quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards WAIR over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with WAIR Positions

More specifically, Makaira Partners was the largest shareholder of Wesco Aircraft Holdings Inc (NYSE:WAIR), with a stake worth $95.1 million reported as of the end of March. Trailing Makaira Partners was Royce & Associates, which amassed a stake valued at $22.6 million. Cove Street Capital, Wallace R. Weitz & Co., and Rutabaga Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Wesco Aircraft Holdings Inc (NYSE:WAIR). Marshall Wace LLP had $4.5 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Wesco Aircraft Holdings Inc (NYSE:WAIR) but similarly valued. We will take a look at Gran Tierra Energy Inc. (NYSE:GTE), ACCO Brands Corporation (NYSE:ACCO), Extreme Networks, Inc (NASDAQ:EXTR), and Continental Building Products Inc (NYSE:CBPX). All of these stocks’ market caps match WAIR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GTE 16 269130 0
ACCO 18 49974 -3
EXTR 20 97339 0
CBPX 20 87312 4
Average 18.5 125939 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $126 million. That figure was $195 million in WAIR’s case. Extreme Networks, Inc (NASDAQ:EXTR) is the most popular stock in this table. On the other hand Gran Tierra Energy Inc. (NYSE:GTE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Wesco Aircraft Holdings Inc (NYSE:WAIR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on WAIR as the stock returned 14.4% during the same period 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.

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