Where Do Hedge Funds Stand On AAR Corp. (AIR)?

In this article you are going to find out whether hedge funds think AAR Corp. (NYSE:AIR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

AAR Corp. (NYSE:AIR) shareholders have witnessed a decrease in hedge fund interest in recent months. AAR Corp. (NYSE:AIR) was in 18 hedge funds’ portfolios at the end of September. The all time high for this statistic is 23. Our calculations also showed that AIR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are a lot of metrics stock traders can use to size up publicly traded companies. A pair of the best metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top money managers can outpace the broader indices by a solid amount (see the details here).

AlphaOne Capital Partners' Returns, AUM and Holdings

Paul Hondros of AlphaOne Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding AAR Corp. (NYSE:AIR).

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

At the end of September, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in AIR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AIR A Good Stock To Buy?

More specifically, Fisher Asset Management was the largest shareholder of AAR Corp. (NYSE:AIR), with a stake worth $13.3 million reported as of the end of September. Trailing Fisher Asset Management was GAMCO Investors, which amassed a stake valued at $6.9 million. Beach Point Capital Management, Royce & Associates, and Arrowstreet 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 Beach Point Capital Management allocated the biggest weight to AAR Corp. (NYSE:AIR), around 2.39% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, setting aside 0.79 percent of its 13F equity portfolio to AIR.

Due to the fact that AAR Corp. (NYSE:AIR) has witnessed bearish sentiment from the smart money, it’s easy to see that there was a specific group of money managers who sold off their full holdings by the end of the third quarter. At the top of the heap, Paul Hondros’s AlphaOne Capital Partners sold off the largest stake of the 750 funds tracked by Insider Monkey, totaling an estimated $0.4 million in stock. Donald Sussman’s fund, Paloma Partners, also cut its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AAR Corp. (NYSE:AIR) but similarly valued. These stocks are SunOpta, Inc. (NASDAQ:STKL), Star Bulk Carriers Corp. (NASDAQ:SBLK), Noble Midstream Partners LP (NYSE:NBLX), VBI Vaccines, Inc. (NASDAQ:VBIV), SMART Global Holdings, Inc. (NASDAQ:SGH), Heritage Financial Corporation (NASDAQ:HFWA), and Westlake Chemical Partners LP (NYSE:WLKP). This group of stocks’ market caps resemble AIR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STKL 13 253119 0
SBLK 5 303910 -2
NBLX 1 1820 0
VBIV 11 191461 1
SGH 14 287640 0
HFWA 6 14208 -1
WLKP 2 1933 -2
Average 7.4 150584 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $44 million in AIR’s case. SMART Global Holdings, Inc. (NASDAQ:SGH) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NYSE:NBLX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks AAR Corp. (NYSE:AIR) is more popular among hedge funds. Our overall hedge fund sentiment score for AIR is 77.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on AIR as the stock returned 79.6% since the end of September (through 12/14) 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.