Was The Smart Money Right About AerCap Holdings N.V. (AER)?

Is AerCap Holdings N.V. (NYSE:AER) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

AerCap Holdings N.V. (NYSE:AER) was in 45 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 77. AER investors should pay attention to an increase in support from the world’s most elite money managers in recent months. There were 43 hedge funds in our database with AER positions at the end of the first quarter. Our calculations also showed that AER isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a look at the recent hedge fund action regarding AerCap Holdings N.V. (NYSE:AER).

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

Heading into the third quarter of 2021, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the first quarter of 2020. By comparison, 30 hedge funds held shares or bullish call options in AER a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

More specifically, Eagle Capital Management was the largest shareholder of AerCap Holdings N.V. (NYSE:AER), with a stake worth $350.9 million reported as of the end of June. Trailing Eagle Capital Management was Lyrical Asset Management, which amassed a stake valued at $245.2 million. Basswood Capital, Arrowstreet Capital, and Monarch Alternative Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Monarch Alternative Capital allocated the biggest weight to AerCap Holdings N.V. (NYSE:AER), around 20.12% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, earmarking 7.16 percent of its 13F equity portfolio to AER.

As aggregate interest increased, key money managers were breaking ground themselves. Athanor Capital, managed by Parvinder Thiara, initiated the most outsized position in AerCap Holdings N.V. (NYSE:AER). Athanor Capital had $25.7 million invested in the company at the end of the quarter. Steven Tananbaum’s GoldenTree Asset Management also made a $23.2 million investment in the stock during the quarter. The other funds with brand new AER positions are D. E. Shaw’s D E Shaw, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Allon Hellmann’s Full18 Capital.

Let’s go over hedge fund activity in other stocks similar to AerCap Holdings N.V. (NYSE:AER). We will take a look at Janus Henderson Group plc (NYSE:JHG), Acuity Brands, Inc. (NYSE:AYI), Prosperity Bancshares, Inc. (NYSE:PB), ShockWave Medical, Inc. (NASDAQ:SWAV), Tetra Tech, Inc. (NASDAQ:TTEK), Choice Hotels International, Inc. (NYSE:CHH), and SLM Corp (NASDAQ:SLM). This group of stocks’ market valuations are similar to AER’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $1425 million in AER’s case. Acuity Brands, Inc. (NYSE:AYI) is the most popular stock in this table. On the other hand Choice Hotels International, Inc. (NYSE:CHH) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks AerCap Holdings N.V. (NYSE:AER) is more popular among hedge funds. Our overall hedge fund sentiment score for AER is 74.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 through November 5th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on AER as the stock returned 31.8% since the end of June (through 11/5) 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.