Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to American Outdoor Brands Corporation (NASDAQ:AOBC) changed recently.
American Outdoor Brands Corporation (NASDAQ:AOBC) was in 15 hedge funds' portfolios at the end of the first quarter of 2019. AOBC has seen an increase in hedge fund interest in recent months. There were 14 hedge funds in our database with AOBC holdings at the end of the previous quarter. Our calculations also showed that AOBC isn't among the 30 most popular stocks among hedge funds.
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Let's take a peek at the new hedge fund action regarding American Outdoor Brands Corporation (NASDAQ:AOBC).
What have hedge funds been doing with American Outdoor Brands Corporation (NASDAQ:AOBC)?
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in AOBC a year ago. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of American Outdoor Brands Corporation (NASDAQ:AOBC), with a stake worth $28.4 million reported as of the end of March. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $19.2 million. Arrowstreet Capital, Greenhouse Funds, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key hedge funds were leading the bulls' herd. Greenhouse Funds, managed by Joe Milano, initiated the largest position in American Outdoor Brands Corporation (NASDAQ:AOBC). Greenhouse Funds had $8.1 million invested in the company at the end of the quarter. Joe Milano's Greenhouse Funds also made a $2.3 million investment in the stock during the quarter. The following funds were also among the new AOBC investors: Steve Pei's Gratia Capital, Israel Englander's Millennium Management, and Paul Tudor Jones's Tudor Investment Corp.
Let's also examine hedge fund activity in other stocks similar to American Outdoor Brands Corporation (NASDAQ:AOBC). We will take a look at Ethan Allen Interiors Inc. (NYSE:ETH), Donnelley Financial Solutions, Inc. (NYSE:DFIN), Just Energy Group, Inc. (NYSE:JE), and Independent Bank Corporation (NASDAQ:IBCP). All of these stocks' market caps are similar to AOBC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ETH,17,68127,2 DFIN,14,52851,-5 JE,10,20148,1 IBCP,11,47151,0 Average,13,47069,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $81 million in AOBC's case. Ethan Allen Interiors Inc. (NYSE:ETH) is the most popular stock in this table. On the other hand Just Energy Group, Inc. (NYSE:JE) is the least popular one with only 10 bullish hedge fund positions. American Outdoor Brands Corporation (NASDAQ:AOBC) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AOBC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AOBC were disappointed as the stock returned -2.1% 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.