We can judge whether Aircastle Limited (NYSE:AYR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Aircastle Limited (NYSE:AYR) has experienced an increase in hedge fund sentiment of late. Our calculations also showed that AYR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Ric Dillon of Diamond Hill Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the new hedge fund action encompassing Aircastle Limited (NYSE:AYR).
What have hedge funds been doing with Aircastle Limited (NYSE:AYR)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AYR over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Aircastle Limited (NYSE:AYR) was held by Diamond Hill Capital, which reported holding $44.3 million worth of stock at the end of September. It was followed by Goodnow Investment Group with a $23.1 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Goodnow Investment Group allocated the biggest weight to Aircastle Limited (NYSE:AYR), around 3.28% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, earmarking 0.8 percent of its 13F equity portfolio to AYR.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in Aircastle Limited (NYSE:AYR). Balyasny Asset Management had $0.4 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Aircastle Limited (NYSE:AYR) but similarly valued. We will take a look at Cardiovascular Systems Inc (NASDAQ:CSII), Merit Medical Systems, Inc. (NASDAQ:MMSI), Cott Corporation (NYSE:COT), and Usa Compression Partners LP (NYSE:USAC). This group of stocks’ market caps are closest to AYR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSII | 15 | 126566 | -2 |
| MMSI | 16 | 79954 | -1 |
| COT | 26 | 587913 | -1 |
| USAC | 4 | 5116 | 1 |
| Average | 15.25 | 199887 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $89 million in AYR’s case. Cott Corporation (NYSE:COT) is the most popular stock in this table. On the other hand Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 4 bullish hedge fund positions. Aircastle Limited (NYSE:AYR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on AYR as the stock returned 44.1% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
