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Should You Buy Applied Industrial Technologies, Inc. (AIT)?

It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during October and average hedge fund losing about 3%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 4 percentage points during the first half of Q4, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Applied Industrial Technologies, Inc. (NYSE:AIT) during the quarter below.

Applied Industrial Technologies, Inc. (NYSE:AIT) was in 24 hedge funds’ portfolios at the end of the third quarter of 2018. AIT has seen an increase in enthusiasm from smart money of late. There were 23 hedge funds in our database with AIT holdings at the end of the previous quarter. Our calculations also showed that AIT isn’t among the 30 most popular stocks among hedge funds.

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Phill Gross, Adage Capital Management

Let’s check out the key hedge fund action regarding Applied Industrial Technologies, Inc. (NYSE:AIT).

How have hedgies been trading Applied Industrial Technologies, Inc. (NYSE:AIT)?

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the second quarter of 2018. By comparison, 22 hedge funds held shares or bullish call options in AIT heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

AIT_dec2018

More specifically, Adage Capital Management was the largest shareholder of Applied Industrial Technologies, Inc. (NYSE:AIT), with a stake worth $64.7 million reported as of the end of September. Trailing Adage Capital Management was Balyasny Asset Management, which amassed a stake valued at $18.3 million. Royce & Associates, Millennium Management, and Anchor Bolt Capital were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, some big names have been driving this bullishness. Gotham Asset Management, managed by Joel Greenblatt, created the most outsized position in Applied Industrial Technologies, Inc. (NYSE:AIT). Gotham Asset Management had $5.2 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a brand new AIT position is Matthew Hulsizer’s PEAK6 Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Applied Industrial Technologies, Inc. (NYSE:AIT) but similarly valued. We will take a look at Brookfield Business Partners L.P. (NYSE:BBU), Enerplus Corp (NYSE:ERF), iShares MSCI ACWI ex US ETF (NASDAQ:ACWX), and South Jersey Industries Inc (NYSE:SJI). This group of stocks’ market values resemble AIT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBU 6 55418 1
ERF 17 175131 2
ACWX 7 35720 2
SJI 14 92796 2
Average 11 89766 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $166 million in AIT’s case. Enerplus Corp (NYSE:ERF) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Applied Industrial Technologies, Inc. (NYSE:AIT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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