It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards AerCap Holdings N.V. (NYSE:AER) changed during the first quarter.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
[caption id="attachment_30647" align="aligncenter" width="478"] Boykin Curry of Eagle Capital[/caption]
Let's take a gander at the key hedge fund action regarding AerCap Holdings N.V. (NYSE:AER).
How have hedgies been trading AerCap Holdings N.V. (NYSE:AER)?
At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AER over the last 15 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Eagle Capital Management held the most valuable stake in AerCap Holdings N.V. (NYSE:AER), which was worth $372.2 million at the end of the first quarter. On the second spot was Greenlight Capital which amassed $193.8 million worth of shares. Moreover, GLG Partners, Basswood Capital, and Arrowstreet Capital were also bullish on AerCap Holdings N.V. (NYSE:AER), allocating a large percentage of their portfolios to this stock.
Due to the fact that AerCap Holdings N.V. (NYSE:AER) has witnessed declining sentiment from hedge fund managers, we can see that there were a few money managers that slashed their full holdings last quarter. Intriguingly, Richard Barrera's Roystone Capital Partners cut the largest stake of the "upper crust" of funds watched by Insider Monkey, totaling close to $6.9 million in stock, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund cut about $3.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 8 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as AerCap Holdings N.V. (NYSE:AER) but similarly valued. These stocks are Gerdau SA (NYSE:GGB), Guardant Health, Inc. (NASDAQ:GH), HubSpot Inc (NYSE:HUBS), and Arrow Electronics, Inc. (NYSE:ARW). This group of stocks' market caps are similar to AER's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GGB,10,168753,-2 GH,14,174703,7 HUBS,29,621767,7 ARW,22,472588,1 Average,18.75,359453,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $359 million. That figure was $792 million in AER's case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 10 bullish hedge fund positions. AerCap Holdings N.V. (NYSE:AER) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately AER wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AER were disappointed as the stock returned -1.4% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.