We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).
Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) investors should pay attention to an increase in enthusiasm from smart money in recent months. Our calculations also showed that AJRD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are plenty of tools investors use to grade stocks. A duo of the less known tools are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outperform the S&P 500 by a significant amount (see the details here).
Warren Lichtenstein of Steel Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the latest hedge fund action surrounding Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).
What have hedge funds been doing with Aerojet Rocketdyne Holdings Inc (NYSE:AJRD)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in AJRD over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Steel Partners was the largest shareholder of Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), with a stake worth $199.5 million reported as of the end of September. Trailing Steel Partners was GAMCO Investors, which amassed a stake valued at $184.2 million. Renaissance Technologies, D E Shaw, and Two Sigma Advisors 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 Steel Partners allocated the biggest weight to Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), around 71.65% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 1.53 percent of its 13F equity portfolio to AJRD.
Consequently, key money managers were leading the bulls’ herd. PEAK6 Capital Management, managed by Matthew Hulsizer, initiated the most valuable call position in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). PEAK6 Capital Management had $2.8 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $2.1 million investment in the stock during the quarter. The other funds with brand new AJRD positions are Lee Ainslie’s Maverick Capital, Brandon Haley’s Holocene Advisors, and Joel Greenblatt’s Gotham Asset Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) but similarly valued. We will take a look at The Medicines Company (NASDAQ:MDCO), Helen of Troy Limited (NASDAQ:HELE), Repligen Corporation (NASDAQ:RGEN), and FirstCash, Inc. (NASDAQ:FCFS). This group of stocks’ market caps match AJRD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDCO | 32 | 1149542 | -1 |
| HELE | 14 | 206819 | -6 |
| RGEN | 23 | 223018 | 1 |
| FCFS | 16 | 179303 | 1 |
| Average | 21.25 | 439671 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $440 million. That figure was $465 million in AJRD’s case. The Medicines Company (NASDAQ:MDCO) is the most popular stock in this table. On the other hand Helen of Troy Limited (NASDAQ:HELE) is the least popular one with only 14 bullish hedge fund positions. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AJRD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AJRD investors were disappointed as the stock returned -12.5% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
