Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is Arlington Asset Investment Corp (NYSE:AI) a superb investment today? The smart money believes so, as they are collectively buying. The number of long hedge fund bets strengthened by 1 in recent months. At the end of this article we will also compare AI to other stocks including Vivint Solar Inc (NYSE:VSLR), TubeMogul Inc (NASDAQ:TUBE), and Curis, Inc. (NASDAQ:CRIS) to get a better sense of its popularity.
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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What have hedge funds been doing with Arlington Asset Investment Corp (NYSE:AI)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 20% increase from the second quarter of 2016. On the other hand, there were a total of 4 hedge funds with a bullish position in AI at the beginning of this year, which has since risen by 50%. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in Arlington Asset Investment Corp (NYSE:AI). Renaissance Technologies has a $10.5 million position in the stock. The second largest stake is held by Ken Griffin’s Citadel Investment Group, which has a $0.8 million position. Other members of the smart money with similar optimism contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
As industry-wide interest jumped, some big names were breaking ground themselves. Arrowstreet Capital established the biggest position in Arlington Asset Investment Corp (NYSE:AI). Arrowstreet Capital had $0.8 million invested in the company at the end of the quarter. Two Sigma Advisors also made a $0.4 million investment in the stock during the quarter. The other funds with brand new AI positions were AQR Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Arlington Asset Investment Corp (NYSE:AI) but similarly valued. We will take a look at Vivint Solar Inc (NYSE:VSLR), TubeMogul Inc (NASDAQ:TUBE), Curis, Inc. (NASDAQ:CRIS), and Fred’s, Inc. (NASDAQ:FRED). All of these stocks’ market caps are closest to AI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VSLR | 4 | 11539 | -2 |
| TUBE | 5 | 24732 | -2 |
| CRIS | 9 | 13812 | -3 |
| FRED | 5 | 2008 | 0 |
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was also $13 million in AI’s case. Curis, Inc. (NASDAQ:CRIS) is the most popular stock in this table. On the other hand Vivint Solar Inc (NYSE:VSLR) is the least popular one with only 4 bullish hedge fund positions. Arlington Asset Investment Corp (NYSE:AI) 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 CRIS might be a better candidate to consider taking a long position in.
Disclosure: None
