Is AeroVironment, Inc. (AVAV) A Good Stock To Buy ?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on AeroVironment, Inc. (NASDAQ:AVAV).

Is AeroVironment, Inc. (NASDAQ:AVAV) undervalued? Hedge funds are getting less bullish. The number of long hedge fund positions shrunk by 4 recently. Our calculations also showed that avav isn’t among the 30 most popular stocks among hedge funds. AVAV was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 13 hedge funds in our database with AVAV positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Let’s analyze the new hedge fund action regarding AeroVironment, Inc. (NASDAQ:AVAV).

How have hedgies been trading AeroVironment, Inc. (NASDAQ:AVAV)?

At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the second quarter of 2018. By comparison, 4 hedge funds held shares or bullish call options in AVAV a year ago. 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 AVAV Positions

The largest stake in AeroVironment, Inc. (NASDAQ:AVAV) was held by Renaissance Technologies, which reported holding $16.1 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $9.2 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Two Sigma Advisors.

Seeing as AeroVironment, Inc. (NASDAQ:AVAV) has witnessed falling interest from hedge fund managers, it’s safe to say that there were a few fund managers that elected to cut their entire stakes last quarter. Intriguingly, Joel Greenblatt’s Gotham Asset Management cut the biggest investment of all the hedgies followed by Insider Monkey, comprising close to $2.6 million in stock, and Frank Slattery’s Symmetry Peak Management was right behind this move, as the fund dropped about $1.5 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to AeroVironment, Inc. (NASDAQ:AVAV). These stocks are Comfort Systems USA, Inc. (NYSE:FIX), Altra Industrial Motion Corp. (NASDAQ:AIMC), Allegiant Travel Company (NASDAQ:ALGT), and Diodes Incorporated (NASDAQ:DIOD). This group of stocks’ market valuations are closest to AVAV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FIX 24 176595 2
AIMC 21 243891 -14
ALGT 21 355344 6
DIOD 15 69155 -2
Average 20.25 211246 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $33 million in AVAV’s case. Comfort Systems USA, Inc. (NYSE:FIX) is the most popular stock in this table. On the other hand Diodes Incorporated (NASDAQ:DIOD) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks AeroVironment, Inc. (NASDAQ:AVAV) is even less popular than DIOD. Hedge funds dodged a bullet by taking a bearish stance towards AVAV. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately AVAV wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); AVAV investors were disappointed as the stock returned -1.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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