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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Air Lease Corp (NYSE:AL) in this article.
Air Lease Corp (NYSE:AL) was in 20 hedge funds' portfolios at the end of September. The all time high for this statistic is 33. AL has experienced a decrease in hedge fund sentiment recently. There were 22 hedge funds in our database with AL positions at the end of the second quarter. Our calculations also showed that AL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's take a gander at the recent hedge fund action surrounding Air Lease Corp (NYSE:AL).
Do Hedge Funds Think AL Is A Good Stock To Buy Now?
At Q3's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in AL over the last 21 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Windacre Partnership held the most valuable stake in Air Lease Corp (NYSE:AL), which was worth $330.7 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $99.7 million worth of shares. Royce & Associates, Arrowstreet Capital, and Basswood 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 Windacre Partnership allocated the biggest weight to Air Lease Corp (NYSE:AL), around 10.07% of its 13F portfolio. Stamina Capital Management is also relatively very bullish on the stock, dishing out 3.76 percent of its 13F equity portfolio to AL.
Seeing as Air Lease Corp (NYSE:AL) has experienced a decline in interest from the smart money, it's easy to see that there were a few hedge funds that elected to cut their entire stakes by the end of the third quarter. Interestingly, Donald Sussman's Paloma Partners dumped the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $4 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also said goodbye to its stock, about $1.1 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks similar to Air Lease Corp (NYSE:AL). We will take a look at Vicor Corp (NASDAQ:VICR), ASGN Incorporated (NYSE:ASGN), Western Midstream Partners, LP (NYSE:WES), frontdoor, inc. (NASDAQ:FTDR), Scientific Games Corp (NASDAQ:SGMS), Ardagh Group S.A. (NYSE:ARD), and I-Mab (NASDAQ:IMAB). All of these stocks' market caps are closest to AL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VICR,20,75016,1 ASGN,21,73967,8 WES,10,65743,-1 FTDR,38,694601,-3 SGMS,25,990729,1 ARD,7,57156,0 IMAB,11,184475,8 Average,18.9,305955,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $609 million in AL's case. frontdoor, inc. (NASDAQ:FTDR) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 7 bullish hedge fund positions. Air Lease Corp (NYSE:AL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AL is 42.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on AL as the stock returned 42.7% since the end of Q3 (through 12/14) 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.