The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article we look at what those investors think of Great Ajax Corp (NYSE:AJX).
Hedge fund interest in Great Ajax Corp (NYSE:AJX) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare AJX to other stocks including Nathan's Famous, Inc. (NASDAQ:NATH), IRSA Inversiones y Representaciones Sociedad Anonima (NYSE:IRS), and BlueLinx Holdings Inc. (NYSE:BXC) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26255" align="aligncenter" width="450"] Louis Navellier of Navellier & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a peek at the new hedge fund action encompassing Great Ajax Corp (NYSE:AJX).
How are hedge funds trading Great Ajax Corp (NYSE:AJX)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 2 hedge funds with a bullish position in AJX 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 Great Ajax Corp (NYSE:AJX) was held by Almitas Capital, which reported holding $7.9 million worth of stock at the end of September. It was followed by Shoals Capital Management with a $5.4 million position. Other investors bullish on the company included Winton Capital Management, Renaissance Technologies, and Navellier & Associates. In terms of the portfolio weights assigned to each position Almitas Capital allocated the biggest weight to Great Ajax Corp (NYSE:AJX), around 8.49% of its 13F portfolio. Shoals Capital Management is also relatively very bullish on the stock, designating 7.46 percent of its 13F equity portfolio to AJX.
Because Great Ajax Corp (NYSE:AJX) has experienced declining sentiment from the smart money, it's safe to say that there was a specific group of hedge funds who were dropping their positions entirely in the third quarter. It's worth mentioning that Mike Vranos's Ellington dumped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, valued at about $1 million in stock. Michael Gelband's fund, ExodusPoint Capital, also sold off its stock, about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Great Ajax Corp (NYSE:AJX). These stocks are Nathan's Famous, Inc. (NASDAQ:NATH), IRSA Inversiones y Representaciones Sociedad Anonima (NYSE:IRS), BlueLinx Holdings Inc. (NYSE:BXC), and Covenant Transportation Group, Inc. (NASDAQ:CVTI). All of these stocks' market caps match AJX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NATH,4,39575,-2 IRS,10,23583,4 BXC,9,127445,2 CVTI,11,19949,-3 Average,8.5,52638,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $19 million in AJX's case. Covenant Transportation Group, Inc. (NASDAQ:CVTI) is the most popular stock in this table. On the other hand Nathan's Famous, Inc. (NASDAQ:NATH) is the least popular one with only 4 bullish hedge fund positions. Great Ajax Corp (NYSE:AJX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AJX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AJX investors were disappointed as the stock returned 0.3% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.