Here is What Hedge Funds Think About AeroVironment, Inc. (AVAV)

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

AeroVironment, Inc. (NASDAQ:AVAV) was in 9 hedge funds’ portfolios at the end of the third quarter of 2015. AVAV investors should pay attention to a decrease in support from the world’s most elite money managers recently. There were 11 hedge funds in our database with AVAV positions at the end of the previous quarter. At the end of this article we will also compare AVAV to other stocks including Haynes International, Inc. (NASDAQ:HAYN), Invacare Corporation (NYSE:IVC), and INTL Fcstone Inc (NASDAQ:INTL) to get a better sense of its popularity.

Keeping this in mind, we’re going to check out the recent action regarding AeroVironment, Inc. (NASDAQ:AVAV).

What does the smart money think about AeroVironment, Inc. (NASDAQ:AVAV)?

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the second quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Headlands Capital, managed by David Park, holds the most valuable position in AeroVironment, Inc. (NASDAQ:AVAV). Headlands Capital has a $10.2 million position in the stock, comprising 10.8% of its 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding a $5.2 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism contain Chuck Royce’s Royce & Associates, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Ken Griffin’s Citadel Investment Group.

Seeing as AeroVironment, Inc. (NASDAQ:AVAV) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few money managers that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Glenn Russell Dubin’s Highbridge Capital Management cut the largest position of all the hedgies tracked by Insider Monkey, comprising close to $1.5 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also sold off its stock, about $1.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to AeroVironment, Inc. (NASDAQ:AVAV). These stocks are Haynes International, Inc. (NASDAQ:HAYN), Invacare Corporation (NYSE:IVC), INTL Fcstone Inc (NASDAQ:INTL), and ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS). All of these stocks’ market caps are closest to AVAV’s market cap.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $21 million in AVAV’s case. ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS) is the most popular stock in this table. On the other hand Haynes International, Inc. (NASDAQ:HAYN) is the least popular one with only 8 bullish hedge fund positions. AeroVironment, Inc. (NASDAQ:AVAV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard IMOS might be a better candidate to consider a long position.