Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Aegion Corporation (NASDAQ:AEGN).
Hedge fund interest in Aegion Corporation (NASDAQ:AEGN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare AEGN to other stocks including , Global Brass and Copper Holdings Inc (NYSE:BRSS), and Myers Industries, Inc. (NYSE:MYE) to get a better sense of its popularity.
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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the recent hedge fund action surrounding Aegion Corporation (NASDAQ:AEGN).
How have hedgies been trading Aegion Corporation (NASDAQ:AEGN)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, representing no change from the second quarter of 2018. By comparison, 14 hedge funds held shares or bullish call options in AEGN heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of Aegion Corporation (NASDAQ:AEGN), with a stake worth $17.9 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $14 million. GAMCO Investors, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Because Aegion Corporation (NASDAQ:AEGN) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there were a few funds that elected to cut their positions entirely in the third quarter. At the top of the heap, Benjamin A. Smith’s Laurion Capital Management dropped the largest stake of all the hedgies monitored by Insider Monkey, totaling an estimated $0.3 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund dropped about $0.3 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Aegion Corporation (NASDAQ:AEGN) but similarly valued. We will take a look at Chaparral Energy, Inc. (NYSE:CHAP), Global Brass and Copper Holdings Inc (NYSE:BRSS), Myers Industries, Inc. (NYSE:MYE), and Briggs & Stratton Corporation (NYSE:BGG). This group of stocks’ market values match AEGN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHAP | 12 | 376265 | 12 |
| BRSS | 17 | 84660 | 3 |
| MYE | 8 | 124367 | -5 |
| BGG | 15 | 24066 | 4 |
| Average | 13 | 152340 | 3.5 |
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 $152 million. That figure was $39 million in AEGN’s case. Global Brass and Copper Holdings Inc (NYSE:BRSS) is the most popular stock in this table. On the other hand Myers Industries, Inc. (NYSE:MYE) is the least popular one with only 8 bullish hedge fund positions. Aegion Corporation (NASDAQ:AEGN) 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. In this regard BRSS might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
