Should You Avoid American Eagle Outfitters (AEO)?

Judging by the fact that American Eagle Outfitters (NYSE:AEO) has witnessed a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers that elected to cut their entire stakes heading into Q4. Intriguingly, Ken Grossman and Glen Schneider’s SG Capital Management sold off the biggest stake of the 700 funds monitored by Insider Monkey, comprising close to $22.2 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund cut about $17.9 million worth of AEO shares. These moves are interesting, as aggregate hedge fund interest fell by 5 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to American Eagle Outfitters (NYSE:AEO). These stocks are ITT Corp (NYSE:ITT), PS Business Parks Inc (NYSE:PSB), Brookdale Senior Living, Inc. (NYSE:BKD), and Cantel Medical Corp. (NYSE:CMN). This group of stocks’ market values are similar to AEO’s market value.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $274 million in AEO’s case. Brookdale Senior Living, Inc. (NYSE:BKD) is the most popular stock in this table. On the other hand PS Business Parks Inc (NYSE:PSB) is the least popular one with only 7 bullish hedge fund positions. American Eagle Outfitters (NYSE:AEO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BKD might be a better candidate to consider a long position.

Disclosure: none.