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Hedge Funds Are Piling Into AeroVironment, Inc. (AVAV)

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In this article we will take a look at whether hedge funds think AeroVironment, Inc. (NASDAQ:AVAV) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

AeroVironment, Inc. (NASDAQ:AVAV) was in 20 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AVAV shareholders have witnessed an increase in support from the world's most elite money managers in recent months. There were 16 hedge funds in our database with AVAV holdings at the end of March. Our calculations also showed that AVAV isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Today there are a multitude of indicators shareholders employ to analyze stocks. A pair of the most underrated indicators are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can trounce the broader indices by a significant amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Adam Usdan of Trellus Management

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 review the latest hedge fund action encompassing AeroVironment, Inc. (NASDAQ:AVAV).

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

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in AVAV 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.

The largest stake in AeroVironment, Inc. (NASDAQ:AVAV) was held by ARK Investment Management, which reported holding $44.5 million worth of stock at the end of June. It was followed by Fisher Asset Management with a $19.7 million position. Other investors bullish on the company included Heard Capital, Citadel Investment Group, and Royce & Associates. In terms of the portfolio weights assigned to each position Heard Capital allocated the biggest weight to AeroVironment, Inc. (NASDAQ:AVAV), around 3.69% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, dishing out 0.58 percent of its 13F equity portfolio to AVAV.

Consequently, key hedge funds were leading the bulls' herd. Renaissance Technologies, assembled the most outsized position in AeroVironment, Inc. (NASDAQ:AVAV). Renaissance Technologies had $1.6 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Adam Usdan's Trellus Management Company, Jinghua Yan's TwinBeech Capital, and Bruce Kovner's Caxton Associates LP.

Let's also examine hedge fund activity in other stocks similar to AeroVironment, Inc. (NASDAQ:AVAV). These stocks are Magellan Health Inc (NASDAQ:MGLN), Retail Properties of America Inc (NYSE:RPAI), Boot Barn Holdings Inc (NYSE:BOOT), Federal Signal Corporation (NYSE:FSS), FibroGen Inc (NASDAQ:FGEN), Forward Air Corporation (NASDAQ:FWRD), and ESCO Technologies Inc. (NYSE:ESE). This group of stocks' market values resemble AVAV's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGLN,26,828067,2 RPAI,16,40374,7 BOOT,29,217618,11 FSS,13,46834,0 FGEN,17,192268,-1 FWRD,19,318287,6 ESE,13,78678,5 Average,19,246018,4.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $101 million in AVAV's case. Boot Barn Holdings Inc (NYSE:BOOT) is the most popular stock in this table. On the other hand Federal Signal Corporation (NYSE:FSS) is the least popular one with only 13 bullish hedge fund positions. AeroVironment, Inc. (NASDAQ:AVAV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVAV is 60.9. 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 AVAV wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AVAV were disappointed as the stock returned -9.3% 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.