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Hedge Funds Are Dumping Air Lease Corp (AL)

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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 June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Air Lease Corp (NYSE:AL).

Air Lease Corp (NYSE:AL) was in 22 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. AL has seen a decrease in support from the world's most elite money managers of late. There were 27 hedge funds in our database with AL holdings at the end of March. Our calculations also showed that AL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Lindenbaum Basswood Capital
Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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 let's take a glance at the latest hedge fund action encompassing Air Lease Corp (NYSE:AL).

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

Heading into the third quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AL over the last 24 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Windacre Partnership, managed by Snehal Amin, holds the largest position in Air Lease Corp (NYSE:AL). Windacre Partnership has a $350.7 million position in the stock, comprising 7.7% of its 13F portfolio. The second most bullish fund manager is Lyrical Asset Management, managed by Andrew Wellington and Jeff Keswin, which holds a $134.6 million position; 1.6% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism encompass Chuck Royce's Royce & Associates, Matthew Lindenbaum's Basswood Capital and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Windacre Partnership allocated the biggest weight to Air Lease Corp (NYSE:AL), around 7.75% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, earmarking 1.63 percent of its 13F equity portfolio to AL.

Judging by the fact that Air Lease Corp (NYSE:AL) has experienced falling interest from the smart money, it's safe to say that there lies a certain "tier" of hedgies that slashed their entire stakes by the end of the second quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the biggest investment of the "upper crust" of funds watched by Insider Monkey, comprising about $23.5 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dropped about $9.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds by the end of the second quarter.

Let's check out hedge fund activity in other stocks similar to Air Lease Corp (NYSE:AL). These stocks are RLI Corp. (NYSE:RLI), Blackstone Mortgage Trust Inc (NYSE:BXMT), Antero Resources Corp (NYSE:AR), UP Fintech Holding Limited (NASDAQ:TIGR), Highwoods Properties Inc (NYSE:HIW), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), and OneConnect Financial Technology Co., Ltd. (NYSE:OCFT). All of these stocks' market caps are similar to AL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RLI,15,195173,1 BXMT,12,185212,-4 AR,33,841084,0 TIGR,16,208731,2 HIW,14,77096,-6 SAIL,23,1060487,-6 OCFT,13,37724,3 Average,18,372215,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $678 million in AL's case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand Blackstone Mortgage Trust Inc (NYSE:BXMT) is the least popular one with only 12 bullish hedge fund positions. Air Lease Corp (NYSE:AL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AL is 43.8. 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 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 gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately AL wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AL were disappointed as the stock returned 0.4% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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