World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Astronics Corporation (NASDAQ:ATRO) a worthy investment now? The best stock pickers are getting less optimistic. The number of long hedge fund bets retreated by 3 lately. Our calculations also showed that ATRO isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 32 percentage points since May 2014 through March 12, 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a glance at the latest hedge fund action surrounding Astronics Corporation (NASDAQ:ATRO).
How have hedgies been trading Astronics Corporation (NASDAQ:ATRO)?
At Q4's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ATRO over the last 14 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, ACK Asset Management held the most valuable stake in Astronics Corporation (NASDAQ:ATRO), which was worth $32 million at the end of the fourth quarter. On the second spot was International Value Advisers which amassed $17.4 million worth of shares. Moreover, Millennium Management, Royce & Associates, and Citadel Investment Group were also bullish on Astronics Corporation (NASDAQ:ATRO), allocating a large percentage of their portfolios to this stock.
Since Astronics Corporation (NASDAQ:ATRO) has experienced bearish sentiment from hedge fund managers, it's safe to say that there exists a select few fund managers that decided to sell off their entire stakes in the third quarter. Intriguingly, D. E. Shaw's D E Shaw dumped the largest investment of the "upper crust" of funds monitored by Insider Monkey, worth close to $1.3 million in stock. Jim Simons's fund, Renaissance Technologies, also dumped its stock, about $1.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Astronics Corporation (NASDAQ:ATRO). We will take a look at Stewart Information Services Corp (NYSE:STC), NextGen Healthcare, Inc. (NASDAQ:NXGN), Primoris Services Corp (NASDAQ:PRIM), and Piper Jaffray Companies (NYSE:PJC). All of these stocks' market caps match ATRO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STC,14,148887,-6 NXGN,15,35036,2 PRIM,9,27023,1 PJC,5,39248,-2 Average,10.75,62549,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $61 million in ATRO's case. NextGen Healthcare, Inc. (NASDAQ:NXGN) is the most popular stock in this table. On the other hand Piper Jaffray Companies (NYSE:PJC) is the least popular one with only 5 bullish hedge fund positions. Astronics Corporation (NASDAQ:ATRO) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately ATRO wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); ATRO investors were disappointed as the stock returned 5.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.