Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Hedge fund interest in Air Lease Corp (NYSE:AL) shares was flat during the third quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Monolithic Power Systems, Inc. (NASDAQ:MPWR), Graham Holdings Co (NYSE:GHC), and Ellie Mae Inc (NYSE:ELLI) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Hedge fund activity in Air Lease Corp (NYSE:AL)
Heading into the fourth quarter of 2016, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter, holding ownership steady at its yearly high. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Osterweis Capital Management, managed by John Osterweis, holds the most valuable position in Air Lease Corp (NYSE:AL). Osterweis Capital Management has a $55.1 million position in the stock, comprising 3.3% of its 13F portfolio. The second most bullish fund manager is Royce & Associates, managed by Chuck Royce, which holds a $51.8 million position. Other members of the smart money that hold long positions contain Israel Englander’s Millennium Management, Bernard Selz’ Selz Capital, and Matthew Lindenbaum’s Basswood Capital.
Since Air Lease Corp (NYSE:AL) has experienced a decline in interest from hedge fund managers, we can see that there were a few funds that elected to cut their positions entirely heading into fourth quarter. Interestingly, Ernest Chow and Jonathan Howe’s Sensato Capital Management cut the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at about $8.6 million in stock, and George Hall’s Clinton Group was right behind this move, as the fund dumped about $5.2 million worth of shares. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Air Lease Corp (NYSE:AL). These stocks are Monolithic Power Systems, Inc. (NASDAQ:MPWR), Graham Holdings Co (NYSE:GHC), Ellie Mae Inc (NYSE:ELLI), and Tenet Healthcare Corp (NYSE:THC). This group of stocks’ market valuations are closest to AL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MPWR | 19 | 185808 | 1 |
| GHC | 17 | 595112 | -2 |
| ELLI | 22 | 263201 | -2 |
| THC | 39 | 759241 | 0 |
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $451 million. That figure was $286 million in AL’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand Graham Holdings Co (NYSE:GHC) is the least popular one with only 17 bullish hedge fund positions. Air Lease Corp (NYSE:AL) 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 THC might be a better candidate to consider a long position in.
Disclosure: None
