Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Advanced Energy Industries, Inc. (NASDAQ:AEIS).
Is AEIS a good stock to buy now? Hedge fund interest in Advanced Energy Industries, Inc. (NASDAQ:AEIS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that AEIS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Masonite International Corp (NYSE:DOOR), Kennametal Inc. (NYSE:KMT), and APi Group Corporation (NYSE:APG) to gather more data points.
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 66 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.
At Insider Monkey we scour multiple sources to uncover 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 and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. 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 website. Keeping this in mind we’re going to check out the fresh hedge fund action encompassing Advanced Energy Industries, Inc. (NASDAQ:AEIS).
Do Hedge Funds Think AEIS Is A Good Stock To Buy Now?
At third quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AEIS over the last 21 quarters. So, let’s find out 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, Royce & Associates, managed by Chuck Royce, holds the largest position in Advanced Energy Industries, Inc. (NASDAQ:AEIS). Royce & Associates has a $18.7 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $18.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions comprise Ken Fisher’s Fisher Asset Management, Renaissance Technologies and Mark Coe’s Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Clough Capital Partners allocated the biggest weight to Advanced Energy Industries, Inc. (NASDAQ:AEIS), around 0.44% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to AEIS.
Judging by the fact that Advanced Energy Industries, Inc. (NASDAQ:AEIS) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that slashed their full holdings by the end of the third quarter. Interestingly, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, totaling about $5.1 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Advanced Energy Industries, Inc. (NASDAQ:AEIS) but similarly valued. We will take a look at Masonite International Corp (NYSE:DOOR), Kennametal Inc. (NYSE:KMT), APi Group Corporation (NYSE:APG), Pretium Resources Inc (NYSE:PVG), Compania Cervecerias Unidas S.A. (NYSE:CCU), Manchester United PLC (NYSE:MANU), and Altra Industrial Motion Corp. (NASDAQ:AIMC). All of these stocks’ market caps are closest to AEIS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $87 million in AEIS’s case. Masonite International Corp (NYSE:DOOR) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 5 bullish hedge fund positions. Advanced Energy Industries, Inc. (NASDAQ:AEIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AEIS is 59.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on AEIS as the stock returned 60.2% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Advanced Energy Industries Inc (NASDAQ:AEIS)
Follow Advanced Energy Industries Inc (NASDAQ:AEIS)
Disclosure: None. This article was originally published at Insider Monkey.