How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding AerCap Holdings N.V. (NYSE:AER).
Is AerCap Holdings N.V. (NYSE:AER) ready to rally soon? Investors who are in the know were taking an optimistic view. The number of long hedge fund positions moved up by 2 lately. AerCap Holdings N.V. (NYSE:AER) was in 45 hedge funds’ portfolios at the end of the second quarter of 2021. 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 Q2 rankings). There were 43 hedge funds in our database with AER holdings at the end of March.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey, we scour multiple sources to uncover 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 EV 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 take a look at the recent hedge fund action surrounding AerCap Holdings N.V. (NYSE:AER).
Do Hedge Funds Think AER Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the first quarter of 2020. On the other hand, there were a total of 30 hedge funds with a bullish position in AER a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Eagle Capital Management held the most valuable stake in AerCap Holdings N.V. (NYSE:AER), which was worth $350.9 million at the end of the second quarter. On the second spot was Lyrical Asset Management which amassed $245.2 million worth of shares. Basswood Capital, Arrowstreet Capital, and Monarch Alternative 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 Monarch Alternative Capital allocated the biggest weight to AerCap Holdings N.V. (NYSE:AER), around 20.12% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, designating 7.16 percent of its 13F equity portfolio to AER.
Consequently, key hedge funds have been driving this bullishness. Athanor Capital, managed by Parvinder Thiara, established the most outsized position in AerCap Holdings N.V. (NYSE:AER). Athanor Capital had $25.7 million invested in the company at the end of the quarter. Steven Tananbaum’s GoldenTree Asset Management also made a $23.2 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Allon Hellmann’s Full18 Capital.
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), Acuity Brands, Inc. (NYSE:AYI), Prosperity Bancshares, Inc. (NYSE:PB), ShockWave Medical, Inc. (NASDAQ:SWAV), Tetra Tech, Inc. (NASDAQ:TTEK), Choice Hotels International, Inc. (NYSE:CHH), and SLM Corp (NASDAQ:SLM). This group of stocks’ market values are similar to AER’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JHG | 22 | 1203630 | -6 |
| AYI | 33 | 794108 | 2 |
| PB | 16 | 98631 | -5 |
| SWAV | 27 | 236200 | 10 |
| TTEK | 25 | 134924 | 2 |
| CHH | 15 | 153051 | -2 |
| SLM | 27 | 1091304 | 0 |
| Average | 23.6 | 530264 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $1425 million in AER’s case. Acuity Brands, Inc. (NYSE:AYI) is the most popular stock in this table. On the other hand Choice Hotels International, Inc. (NYSE:CHH) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks AerCap Holdings N.V. (NYSE:AER) is more popular among hedge funds. Our overall hedge fund sentiment score for AER is 74.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on AER as the stock returned 18% since the end of June (through 10/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Aercap Holdings N.v. (NYSE:AER)
Follow Aercap Holdings N.v. (NYSE:AER)
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Disclosure: None. This article was originally published at Insider Monkey.
