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Is AAN Stock A Buy or Sell?

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·6 min read
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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on The Aaron's Company, Inc. (NYSE:AAN).

Is AAN stock a buy? The smart money was turning less bullish. The number of bullish hedge fund positions decreased by 16 recently. The Aaron's Company, Inc. (NYSE:AAN) was in 23 hedge funds' portfolios at the end of December. The all time high for this statistic is 39. Our calculations also showed that AAN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 39 hedge funds in our database with AAN positions at the end of the third quarter.

Today there are several metrics shareholders have at their disposal to evaluate their holdings. Some of the most useful metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can trounce the market by a solid margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 let's view the new hedge fund action surrounding The Aaron's Company, Inc. (NYSE:AAN).

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

At Q4's end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -41% from the third quarter of 2020. By comparison, 32 hedge funds held shares or bullish call options in AAN a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

The largest stake in The Aaron's Company, Inc. (NYSE:AAN) was held by Hawk Ridge Management, which reported holding $15 million worth of stock at the end of December. It was followed by HG Vora Capital Management with a $13.3 million position. Other investors bullish on the company included Royce & Associates, Newtyn Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Newtyn Management allocated the biggest weight to The Aaron's Company, Inc. (NYSE:AAN), around 1.71% of its 13F portfolio. Verdad Advisers is also relatively very bullish on the stock, earmarking 1.44 percent of its 13F equity portfolio to AAN.

Since The Aaron's Company, Inc. (NYSE:AAN) has faced a decline in interest from the aggregate hedge fund industry, it's safe to say that there was a specific group of hedge funds who were dropping their entire stakes in the fourth quarter. At the top of the heap, Ric Dillon's Diamond Hill Capital sold off the biggest position of the "upper crust" of funds watched by Insider Monkey, totaling about $49.9 million in stock, and Ken Heebner's Capital Growth Management was right behind this move, as the fund dumped about $24.6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 16 funds in the fourth quarter.

Let's go over hedge fund activity in other stocks similar to The Aaron's Company, Inc. (NYSE:AAN). These stocks are Sinovac Biotech Ltd. (NASDAQ:SVA), DMC Global Inc. (NASDAQ:BOOM), DermTech, Inc. (NASDAQ:DMTK), Cardiff Oncology, Inc. (NASDAQ:CRDF), Freeline Therapeutics Holdings plc (NASDAQ:FRLN), CBTX, Inc. (NASDAQ:CBTX), and HarborOne Bancorp, Inc. (NASDAQ:HONE). This group of stocks' market valuations match AAN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SVA,3,111710,0 BOOM,8,15800,2 DMTK,14,115315,8 CRDF,18,179904,1 FRLN,6,24928,-3 CBTX,8,16569,0 HONE,14,35638,0 Average,10.1,71409,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $78 million in AAN's case. Cardiff Oncology, Inc. (NASDAQ:CRDF) is the most popular stock in this table. On the other hand Sinovac Biotech Ltd. (NASDAQ:SVA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks The Aaron's Company, Inc. (NYSE:AAN) is more popular among hedge funds. Our overall hedge fund sentiment score for AAN is 56.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on AAN as the stock returned 35.3% since the end of December (through 4/19) 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.