The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded PAE Incorporated (NASDAQ:PAE) based on those filings.
Is PAE Incorporated (NASDAQ:PAE) worth your attention right now? Prominent investors were getting more bullish. The number of long hedge fund positions advanced by 3 recently. PAE Incorporated (NASDAQ:PAE) was in 19 hedge funds’ portfolios at the end of March. The all time high for this statistic is 21. Our calculations also showed that PAE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 encompassing PAE Incorporated (NASDAQ:PAE).
Do Hedge Funds Think PAE Is A Good Stock To Buy Now?
At first quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the fourth quarter of 2020. On the other hand, there were a total of 21 hedge funds with a bullish position in PAE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Engine Capital held the most valuable stake in PAE Incorporated (NASDAQ:PAE), which was worth $22.6 million at the end of the fourth quarter. On the second spot was Chescapmanager LLC which amassed $18.8 million worth of shares. Millennium Management, Ionic Capital Management, and Clearline Capital 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 Engine Capital allocated the biggest weight to PAE Incorporated (NASDAQ:PAE), around 7.21% of its 13F portfolio. Ionic Capital Management is also relatively very bullish on the stock, designating 2.04 percent of its 13F equity portfolio to PAE.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Engine Capital, managed by Arnaud Ajdler, initiated the largest position in PAE Incorporated (NASDAQ:PAE). Engine Capital had $22.6 million invested in the company at the end of the quarter. David Rosen’s Rubric Capital Management also initiated a $4.9 million position during the quarter. The other funds with brand new PAE positions are John Overdeck and David Siegel’s Two Sigma Advisors, Cliff Asness’s AQR Capital Management, and Greg Eisner’s Engineers Gate Manager.
Let’s go over hedge fund activity in other stocks similar to PAE Incorporated (NASDAQ:PAE). These stocks are Banco Macro SA (NYSE:BMA), Univest Financial Corporation (NASDAQ:UVSP), Aerie Pharmaceuticals Inc (NASDAQ:AERI), Perdoceo Education Corporation (NASDAQ:PRDO), Argan, Inc. (NYSE:AGX), Echo Global Logistics, Inc. (NASDAQ:ECHO), and DMC Global Inc. (NASDAQ:BOOM). This group of stocks’ market valuations are similar to PAE’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $101 million in PAE’s case. Perdoceo Education Corporation (NASDAQ:PRDO) is the most popular stock in this table. On the other hand Banco Macro SA (NYSE:BMA) is the least popular one with only 8 bullish hedge fund positions. PAE Incorporated (NASDAQ:PAE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PAE is 69.5. 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 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 gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately PAE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PAE were disappointed as the stock returned 3.5% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.