Sentiment Flatlines, But Smart Money Still Loves AerCap Holdings N.V. (AER)

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 some times, 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.

Hedge fund interest in AerCap Holdings N.V. (NYSE:AER) shares was flat during the last quarter. This is usually a negative indicator. At the end of this article we will also compare AER to other stocks including Staples, Inc. (NASDAQ:SPLS), Sensata Technologies Holding N.V. (NYSE:ST), and Fibria Celulose SA (ADR) (NYSE:FBR) to get a better sense of its popularity.

In the eyes of most investors, hedge funds are seen as underperforming, outdated investment tools of years past. While there are over an 8,000 funds in operation at the moment, we look at the masters of this club, around 700 funds. These money managers command bulk of the hedge fund industry’s total capital, and by observing their top stock picks, Insider Monkey has formulated various investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s take a glance at the recent action regarding AerCap Holdings N.V. (NYSE:AER).

What have hedge funds been doing with AerCap Holdings N.V. (NYSE:AER)?

Heading into Q4, a total of 77 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or had already accumulated large positions).

Of the funds tracked by Insider Monkey, David Einhorn’s Greenlight Capital has the largest position in AerCap Holdings N.V. (NYSE:AER), worth close to $280.9 million, amounting to 4.7% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $215.5 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism comprise Leon Cooperman’s Omega Advisors, Lee Ainslie’s Maverick Capital, and D E Shaw.

Due to the fact that AerCap Holdings N.V. (NYSE:AER) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds who were dropping their full holdings heading into Q4. At the top of the heap, Barry Rosenstein’s JANA Partners dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $481.3 million in stock, and Kieran Goodwin’s Panning Capital Management was right behind this move, as the fund sold off about $44.6 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to AerCap Holdings N.V. (NYSE:AER). These stocks are Staples, Inc. (NASDAQ:SPLS), Sensata Technologies Holding N.V. (NYSE:ST), Fibria Celulose SA (ADR) (NYSE:FBR), and Mallinckrodt PLC (NYSE:MNK). This group of stocks’ market caps resemble AER’s market cap.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.16 billion. That figure was $2.99 billion in AER’s case. Staples, Inc. (NASDAQ:SPLS) is the most popular stock in this table. On the other hand Fibria Celulose SA (ADR) (NYSE:FBR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks AerCap Holdings N.V. (NYSE:AER) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and have far more capital allocated towards it, it may be a good idea to analyze it in detail and potentially include it in your portfolio.