Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) based on that data and determine whether they were really smart about the stock.
Is Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) a buy here? Hedge funds were becoming more confident. The number of bullish hedge fund bets improved by 2 recently. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) was in 25 hedge funds' portfolios at the end of June. The all time high for this statistics is 27. Our calculations also showed that AJRD isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let's review the new hedge fund action surrounding Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).
What have hedge funds been doing with Aerojet Rocketdyne Holdings Inc (NYSE:AJRD)?
At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the first quarter of 2020. On the other hand, there were a total of 18 hedge funds with a bullish position in AJRD a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) was held by Steel Partners, which reported holding $156.6 million worth of stock at the end of September. It was followed by GAMCO Investors with a $127.1 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and D E Shaw. In terms of the portfolio weights assigned to each position Steel Partners allocated the biggest weight to Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), around 82.33% of its 13F portfolio. Cloverdale Capital Management is also relatively very bullish on the stock, setting aside 3.05 percent of its 13F equity portfolio to AJRD.
Now, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). Arrowstreet Capital had $8.1 million invested in the company at the end of the quarter. C. Jonathan Gattman's Cloverdale Capital Management also initiated a $4.1 million position during the quarter. The following funds were also among the new AJRD investors: Michael Gelband's ExodusPoint Capital, Qing Li's Sciencast Management, and Paul Tudor Jones's Tudor Investment Corp.
Let's now review hedge fund activity in other stocks similar to Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). We will take a look at First Horizon National Corporation (NYSE:FHN), TFI International Inc. (NYSE:TFII), Vicor Corp (NASDAQ:VICR), New Residential Investment Corp (NYSE:NRZ), Companhia Paranaense de Energia (NYSE:ELP), Vivint Smart Home, Inc. (NYSE:VVNT), and Alkermes Plc (NASDAQ:ALKS). This group of stocks' market caps are similar to AJRD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FHN,35,384471,4 TFII,10,67009,-2 VICR,19,81691,5 NRZ,22,121379,-1 ELP,12,39175,5 VVNT,5,5836,-4 ALKS,26,702713,-4 Average,18.4,200325,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $405 million in AJRD's case. First Horizon National Corporation (NYSE:FHN) is the most popular stock in this table. On the other hand Vivint Smart Home, Inc. (NYSE:VVNT) is the least popular one with only 5 bullish hedge fund positions. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AJRD is 68.1. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately AJRD wasn't nearly as popular as these 10 stocks and hedge funds that were betting on AJRD were disappointed as the stock returned 5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.