Do Hedge Funds Love AR Capital Acquisition Corp (AUMA)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like AR Capital Acquisition Corp (NASDAQ:AUMA).

Hedge fund interest in AR Capital Acquisition Corp (NASDAQ:AUMA) 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 AR Capital Acquisition Corp (NASDAQ:AUMA) to other stocks, including Destination XL Group Inc (NASDAQ:DXLG), Angie’s List Inc (NASDAQ:ANGI), and Reading International, Inc. (NASDAQ:RDI) to get a better sense of its popularity.

In the financial world, there are many methods shareholders use to grade their holdings. A duo of the less known methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top money managers can outperform the S&P 500 by a very impressive amount (see the details here).

With all of this in mind, we’re going to view the latest action surrounding AR Capital Acquisition Corp (NASDAQ:AUMA).

How have hedgies been trading AR Capital Acquisition Corp (NASDAQ:AUMA)?

Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, flat over the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Christian Leone’s Luxor Capital Group has the number one position in AR Capital Acquisition Corp (NASDAQ:AUMA), worth close to $39.8 million, comprising 0.9% of its total 13F portfolio. The second most bullish fund manager is Fir Tree, with a $25.6 million position; 0.4% of its 13F portfolio is allocated to the company. Some other peers that are bullish contain Nick Niell’s Arrowgrass Capital Partners, Michael Novogratz’s Fortress Investment Group, and Paul Glazer’s Glazer Capital.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Q Investments (Specter Holdings). One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Bulldog Investors).

Let’s go over hedge fund activity in other stocks similar to AR Capital Acquisition Corp (NASDAQ:AUMA). We will take a look at Destination XL Group Inc (NASDAQ:DXLG), Angie’s List Inc (NASDAQ:ANGI), Reading International, Inc. (NASDAQ:RDI), and Everyday Health Inc (NYSE:EVDY). All of these stocks’ market caps are closest to AR Capital Acquisition Corp (NASDAQ:AUMA)’s market cap.

As you can see, these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $164 million in AR Capital Acquisition Corp (NASDAQ:AUMA)’s case. Destination XL Group Inc (NASDAQ:DXLG) is the most popular stock in this table. On the other hand, Everyday Health Inc (NYSE:EVDY) is the least popular one with only 9 bullish hedge fund positions. AR Capital Acquisition Corp (NASDAQ:AUMA) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Destination XL Group Inc (NASDAQ:DXLG) might be a better candidate to consider a long position.