Should You Follow The Smart Money Sentiment On AAC Holdings Inc (AAC)?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really difficult for individual investors to make proper and accurate analyses of some small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.



Is AAC Holdings Inc (NYSE:AAC) a buy, sell, or hold? Prominent investors are buying. The number of long hedge fund bets has risen by two in recent months. AAC Holdings Inc (NYSE:AAC) was in 14 hedge funds’ portfolios at the end of the third quarter of 2015. There were 12 hedge funds in our database with AAC Holdings Inc (NYSE:AAC) holdings at the end of the quarter prior to that. At the end of this article, we will also compare AAC Holdings Inc (NYSE:AAC) to other stocks including OncoMed Pharmaceuticals Inc (NASDAQ:OMED), Superior Industries International Inc. (NYSE:SUP), and NN, Inc. (NASDAQ:NNBR) to get a better sense of its popularity.

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In the eyes of most traders, hedge funds are viewed as underperforming, old investment tools of the past. While there are more than 8,000 funds with their doors open at present, our experts look at the leaders of this group, about 700 funds. These investment experts have their hands on the lion’s share of all hedge funds’ total capital, and by observing their inimitable stock picks, Insider Monkey has spotted a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in its backtests.

With all of this in mind, we’re going to take a look at the key action regarding AAC Holdings Inc (NYSE:AAC).

How are hedge funds trading AAC Holdings Inc (NYSE:AAC)?

Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey were long in this stock, an increase of 17% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Deerfield Management, managed by James E. Flynn, holds the largest position in AAC Holdings Inc (NYSE:AAC). Deerfield Management has a $35.6 million position in the stock, comprising 1.4% of its 13F portfolio. On Deerfield Management’s heels is Millennium Management, led by Israel Englander, holding a $12.3 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish comprise Joseph A. Jolson’s Harvest Capital Strategies, James Dondero’s Highland Capital Management, and Drew Cupps’ Cupps Capital Management.

Now, some big names have been driving this bullishness. Millennium Management created the largest position in AAC Holdings Inc (NYSE:AAC). Millennium Management had $12.3 million invested in the company at the end of the quarter. Highland Capital Management also made a $6.9 million investment in the stock during the quarter. The other funds with brand new AAC Holdings positions are William C. Martin’s Raging Capital Management, Israel Englander’s Catapult Capital Management, and Rod Hinze’s KeyPoint Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AAC Holdings Inc (NYSE:AAC) but similarly valued. We will take a look at OncoMed Pharmaceuticals Inc (NASDAQ:OMED), Superior Industries International Inc. (NYSE:SUP), NN, Inc. (NASDAQ:NNBR), and Double Eagle Acqusition Corp (NASDAQ:EAGL). This group of stocks’ market valuations resemble AAC Holdings Inc (NYSE:AAC)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OMED 10 42412 2
SUP 12 58327 5
NNBR 17 59314 2
EAGL 21 188341 21

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $79 million in AAC Holdings Inc (NYSE:AAC)’s case. Double Eagle Acqusition Corp (NASDAQ:EAGL) is the most popular stock in this table. On the other hand, OncoMed Pharmaceuticals Inc (NASDAQ:OMED) is the least popular one with only ten bullish hedge fund positions. AAC Holdings Inc (NYSE:AAC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Double Eagle Acqusition Corp (NASDAQ:EAGL) might be a better candidate to consider a long position in.