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Was The Smart Money Right About AerCap Holdings N.V. (AER)?

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·6 min read
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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding AerCap Holdings N.V. (NYSE:AER).

Is AerCap Holdings N.V. (NYSE:AER) a good investment now? The smart money was becoming more confident. The number of bullish hedge fund bets increased by 2 recently. AerCap Holdings N.V. (NYSE:AER) was in 40 hedge funds' portfolios at the end of December. The all time high for this statistic is 77. Our calculations also showed that AER isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Boykin Curry EAGLE CAPITAL MANAGEMENT
Boykin Curry EAGLE CAPITAL MANAGEMENT

Boykin Curry of Eagle Capital

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 view the recent hedge fund action regarding AerCap Holdings N.V. (NYSE:AER).

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

At the end of the fourth quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 36 hedge funds with a bullish position in AER a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, Eagle Capital Management was the largest shareholder of AerCap Holdings N.V. (NYSE:AER), with a stake worth $349.5 million reported as of the end of December. Trailing Eagle Capital Management was Lyrical Asset Management, which amassed a stake valued at $239.7 million. Greenlight Capital, Basswood Capital, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tiger Management allocated the biggest weight to AerCap Holdings N.V. (NYSE:AER), around 14.61% of its 13F portfolio. 59 North Capital is also relatively very bullish on the stock, earmarking 11.15 percent of its 13F equity portfolio to AER.

As one would reasonably expect, some big names were leading the bulls' herd. Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, created the most outsized position in AerCap Holdings N.V. (NYSE:AER). Empyrean Capital Partners had $58.4 million invested in the company at the end of the quarter. Michael Bilger's 59 North Capital also made a $29.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Len Kipp and Xavier Majic's Maple Rock Capital, Wayne Cooperman's Cobalt Capital Management, and Louis Bacon's Moore Global Investments.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as AerCap Holdings N.V. (NYSE:AER) but similarly valued. We will take a look at Janus Henderson Group plc (NYSE:JHG), Advanced Drainage Systems Inc. (NYSE:WMS), American Campus Communities, Inc. (NYSE:ACC), B2Gold Corp (NYSE:BTG), Oshkosh Corporation (NYSE:OSK), Polaris Inc. (NYSE:PII), and Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE:SBS). This group of stocks' market caps match AER's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JHG,22,780607,1 WMS,25,965545,0 ACC,15,242986,-6 BTG,22,420163,5 OSK,40,405765,11 PII,31,486896,-8 SBS,12,259191,1 Average,23.9,508736,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $509 million. That figure was $1395 million in AER's case. Oshkosh Corporation (NYSE:OSK) is the most popular stock in this table. On the other hand Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE:SBS) is the least popular one with only 12 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. Our overall hedge fund sentiment score for AER is 72.6. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on AER as the stock returned 27.8% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.

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