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Were Hedge Funds Right About Flocking Into AAON, Inc. (AAON) ?

Does AAON, Inc. (NASDAQ:AAON) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

AAON, Inc. (NASDAQ:AAON) was in 6 hedge funds’ portfolios at the end of December. AAON shareholders have witnessed an increase in support from the world’s most elite money managers lately. There were 5 hedge funds in our database with AAON holdings at the end of the previous quarter. Our calculations also showed that aaon isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Roger Ibbotson Zebra Capital

We’re going to take a peek at the latest hedge fund action regarding AAON, Inc. (NASDAQ:AAON).

How are hedge funds trading AAON, Inc. (NASDAQ:AAON)?

Heading into the first quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AAON over the last 14 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with AAON Positions

More specifically, Citadel Investment Group was the largest shareholder of AAON, Inc. (NASDAQ:AAON), with a stake worth $2.2 million reported as of the end of September. Trailing Citadel Investment Group was D E Shaw, which amassed a stake valued at $1 million. Holocene Advisors, Zebra Capital Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, some big names were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the most valuable position in AAON, Inc. (NASDAQ:AAON). PEAK6 Capital Management had $0.1 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.1 million position during the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as AAON, Inc. (NASDAQ:AAON) but similarly valued. We will take a look at Rogers Corporation (NYSE:ROG), Focus Financial Partners Inc. (NASDAQ:FOCS), Anixter International Inc. (NYSE:AXE), and Amicus Therapeutics, Inc. (NASDAQ:FOLD). This group of stocks’ market valuations match AAON’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ROG 7 20974 0
FOCS 8 170222 -4
AXE 14 222819 -3
FOLD 26 580946 -4
Average 13.75 248740 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $4 million in AAON’s case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand Rogers Corporation (NYSE:ROG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks AAON, Inc. (NASDAQ:AAON) is even less popular than ROG. Hedge funds clearly dropped the ball on AAON as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on AAON as the stock returned 36.3% and outperformed the market by an even larger margin.

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

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