Is Atlantic Alliance Partnership Corp (AAPC) A Good Investment?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong sometimes, as in the case of some of their top picks from the index like Micron and Anadarko. The data, though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Is Atlantic Alliance Partnership Corp (NASDAQ:AAPC) a buy, sell, or hold? The smart money is in a pessimistic mood. The number of bullish hedge fund positions inched down by one lately. 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 Cambridge Capital Acquisition Corp (NASDAQ:CAMB), Horizon Technology Finance Corp (NASDAQ:HRZN), and Evans Bancorp Inc. (NYSEAMEX:EVBN) to gather more data points.

Follow Atlantic Alliance Partnership Corp. (NASDAQ:AAPC)

In today’s marketplace there are a lot of indicators that market participants use to evaluate stocks. A duo of the most innovative indicators are hedge fund and insider trading signals. Experts at Insider Monkey, a website specializing in hedge funds, have shown that, historically, those who follow the top picks of the best investment managers can outperform the market by a very impressive margin (see the details here).

Keeping this in mind, let’s take a look at the latest action encompassing Atlantic Alliance Partnership Corp (NASDAQ:AAPC).

What does the smart money think about Atlantic Alliance Partnership Corp (NASDAQ:AAPC)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish in this stock, a drop of 13% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Brian Taylor’s Pine River Capital Management had the biggest position in Atlantic Alliance Partnership Corp (NASDAQ:AAPC), worth close to $5 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Matthew Halbower of Pentwater Capital Management, with a $4.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish encompass Andrew Weiss’ Weiss Asset Management, Louis Bacon’s Moore Global Investments and Nick Niell’s Arrowgrass Capital Partners.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Blue Mountain Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified Atlantic Alliance Partnership Corp (NASDAQ:AAPC) as a viable investment and initiated a position in the stock.

Let’s also review hedge fund activity in other stocks similar to Atlantic Alliance Partnership Corp (NASDAQ:AAPC). We will take a look at Cambridge Capital Acquisition Corp (NASDAQ:CAMB), Horizon Technology Finance Corp (NASDAQ:HRZN), Evans Bancorp Inc. (NYSEAMEX:EVBN), and Unique Fabricating Inc (NYSEMKT:UFAB). This group of stocks’ market valuations are similar to Atlantic Alliance Partnership Corp (NASDAQ:AAPC)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAMB 4 6971 -1
HRZN 7 3106 4
EVBN 4 12228 0
UFAB 4 7016 4

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. Horizon Technology Finance Corp (NASDAQ:HRZN) is the most popular stock in this table with seven funds reporting a holding in the company. Atlantic Alliance Partnership Corp (NASDAQ:AAPC) is not the most popular stock in this group but hedge fund interest is still above average. This might be viewed as a slightly positive sign, but Horizon Technology Finance Corp (NASDAQ:HRZN) might be a better candidate to consider a long position, since it is more popular and registered an increase in popularity during the third quarter.