The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) and see how it was affected.
Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) shareholders have witnessed an increase in support from the world’s most elite money managers recently. At the end of this article we will also compare AJRD to other stocks, including Comfort Systems USA, Inc. (NYSE:FIX), Hollysys Automation Technologies Ltd (NASDAQ:HOLI), and Maiden Holdings, Ltd. (NASDAQ:MHLD) to get a better sense of its popularity.
Follow Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD)
Follow Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD)
If you’d ask most shareholders, hedge funds are assumed to be worthless, old investment tools of yesteryear. While there are more than 8000 funds in operation today, Our researchers choose to focus on the masters of this club, about 700 funds. Most estimates calculate that this group of people orchestrate most of the smart money’s total capital, and by paying attention to their unrivaled investments, Insider Monkey has come up with several investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, we’re going to review the recent action encompassing Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).
What does the smart money think about Aerojet Rocketdyne Holdings Inc (NYSE:AJRD)?
At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 59% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the biggest position in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). GAMCO Investors has a $81.6 million position in the stock, comprising 0.5% of its 13F portfolio. The second largest stake is held by Warren Lichtenstein of Steel Partners, with a $67.6 million position; 10.9% of its 13F portfolio is allocated to the company. Some other peers that are bullish encompass Michael Blitzer’s Kingstown Capital Management, Jim Simons’ Renaissance Technologies and Carl Goldsmith and Scott Klein’s Beach Point Capital Management.
As one would reasonably expect, key hedge funds have been driving this bullishness. Beach Point Capital Management, managed by Carl Goldsmith and Scott Klein, assembled the biggest position in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). Beach Point Capital Management had $13 million invested in the company at the end of the quarter. Manish Chopra’s Tiger Veda also made a $9.1 million investment in the stock during the quarter. The following funds were also among the new AJRD investors: Israel Englander’s Millennium Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and David Costen Haley’s HBK Investments.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) but similarly valued. These stocks are Comfort Systems USA, Inc. (NYSE:FIX), Hollysys Automation Technologies Ltd (NASDAQ:HOLI), Maiden Holdings, Ltd. (NASDAQ:MHLD), and Analogic Corporation (NASDAQ:ALOG). All of these stocks’ market caps are closest to AJRD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FIX | 23 | 82950 | 6 |
| HOLI | 22 | 82765 | 0 |
| MHLD | 20 | 45062 | 5 |
| ALOG | 15 | 106331 | 1 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $79 million, which is considerably lower than the $320 million in AJRD’s case. Comfort Systems USA, Inc. (NYSE:FIX) is the most popular stock in this table with 23 funds disclosing ownership of the company’s shares. On the other hand Analogic Corporation (NASDAQ:ALOG) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
