Is ATRO A Good Stock To Buy Now According To Hedge Funds?

In this article you are going to find out whether hedge funds think Astronics Corporation (NASDAQ:ATRO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is ATRO a good stock to buy now? Astronics Corporation (NASDAQ:ATRO) has experienced a decrease in activity from the world’s largest hedge funds of late. Astronics Corporation (NASDAQ:ATRO) was in 21 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. There were 23 hedge funds in our database with ATRO holdings at the end of June. Our calculations also showed that ATRO 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

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. With all of this in mind let’s take a look at the latest hedge fund action encompassing Astronics Corporation (NASDAQ:ATRO).

Do Hedge Funds Think ATRO Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the second quarter of 2020. By comparison, 15 hedge funds held shares or bullish call options in ATRO a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Astronics Corporation (NASDAQ:ATRO) was held by International Value Advisers, which reported holding $12.8 million worth of stock at the end of September. It was followed by Paradice Investment Management with a $9.8 million position. Other investors bullish on the company included Royce & Associates, Millennium Management, and D E Shaw. In terms of the portfolio weights assigned to each position International Value Advisers allocated the biggest weight to Astronics Corporation (NASDAQ:ATRO), around 1.47% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, setting aside 0.71 percent of its 13F equity portfolio to ATRO.

Judging by the fact that Astronics Corporation (NASDAQ:ATRO) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of fund managers that decided to sell off their entire stakes in the third quarter. Intriguingly, Paul Tudor Jones’s Tudor Investment Corp dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth close to $0.2 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also dumped its stock, about $0.1 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Astronics Corporation (NASDAQ:ATRO) but similarly valued. These stocks are NVE Corporation (NASDAQ:NVEC), A-Mark Precious Metals, Inc. (NASDAQ:AMRK), Akumin Inc. (NASDAQ:AKU), Unifi, Inc. (NYSE:UFI), Equity Bancshares, Inc. (NASDAQ:EQBK), Reliant Bancorp, Inc. (NASDAQ:RBNC), and Neptune Wellness Solutions Inc (NASDAQ:NEPT). This group of stocks’ market valuations are closest to ATRO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVEC 9 16734 0
AMRK 4 6932 2
AKU 3 47643 3
UFI 12 37612 -4
EQBK 6 12966 -2
RBNC 3 5493 1
NEPT 5 41890 3
Average 6 24181 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $51 million in ATRO’s case. Unifi, Inc. (NYSE:UFI) is the most popular stock in this table. On the other hand Akumin Inc. (NASDAQ:AKU) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Astronics Corporation (NASDAQ:ATRO) is more popular among hedge funds. Our overall hedge fund sentiment score for ATRO is 80.4. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on ATRO as the stock returned 50.8% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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