The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 867 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30th holdings, data that is available nowhere else. Should you consider American Eagle Outfitters Inc. (NYSE:AEO) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is American Eagle Outfitters Inc. (NYSE:AEO) a buy here? The best stock pickers were selling. The number of bullish hedge fund positions went down by 17 in recent months. American Eagle Outfitters Inc. (NYSE:AEO) was in 24 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that AEO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 41 hedge funds in our database with AEO positions at the end of the second quarter.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s take a look at the new hedge fund action encompassing American Eagle Outfitters Inc. (NYSE:AEO).
Do Hedge Funds Think AEO Is A Good Stock To Buy Now?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -41% from one quarter earlier. By comparison, 42 hedge funds held shares or bullish call options in AEO a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Select Equity Group held the most valuable stake in American Eagle Outfitters Inc. (NYSE:AEO), which was worth $506.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $246.6 million worth of shares. Atreides Management, Citadel Investment Group, and Arrowstreet 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 Atreides Management allocated the biggest weight to American Eagle Outfitters Inc. (NYSE:AEO), around 5.25% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 1.7 percent of its 13F equity portfolio to AEO.
Because American Eagle Outfitters Inc. (NYSE:AEO) has experienced falling interest from hedge fund managers, logic holds that there is a sect of money managers that elected to cut their entire stakes by the end of the third quarter. Interestingly, Kerr Neilson’s Platinum Asset Management said goodbye to the largest investment of the 750 funds watched by Insider Monkey, valued at an estimated $102.2 million in stock. Rajiv Jain’s fund, GQG Partners, also sold off its stock, about $71.9 million worth. These transactions are important to note, as total hedge fund interest was cut by 17 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as American Eagle Outfitters Inc. (NYSE:AEO) but similarly valued. These stocks are Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX), Fisker Inc. (NYSE:FSR), Qualys Inc (NASDAQ:QLYS), Healthcare Realty Trust Inc (NYSE:HR), Arvinas, Inc. (NASDAQ:ARVN), Murphy USA Inc. (NYSE:MUSA), and PS Business Parks Inc (NYSE:PSB). This group of stocks’ market caps are similar to AEO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OCDX | 30 | 272834 | 9 |
| FSR | 15 | 228103 | -1 |
| QLYS | 18 | 220919 | -2 |
| HR | 18 | 210905 | -1 |
| ARVN | 25 | 312887 | -1 |
| MUSA | 17 | 311081 | -9 |
| PSB | 12 | 103720 | -4 |
| Average | 19.3 | 237207 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $1209 million in AEO’s case. Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX) is the most popular stock in this table. On the other hand PS Business Parks Inc (NYSE:PSB) is the least popular one with only 12 bullish hedge fund positions. American Eagle Outfitters Inc. (NYSE:AEO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AEO is 38.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately AEO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AEO were disappointed as the stock returned 6% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
