Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: AAON, Inc. (NASDAQ:AAON).
AAON, Inc. (NASDAQ:AAON) investors should pay attention to a decrease in hedge fund interest lately. AAON was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. There were 12 hedge funds in our database with AAON holdings at the end of the previous quarter. 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 II-VI, Inc. (NASDAQ:IIVI), Belmond Ltd (NYSE:BEL), and WNS (Holdings) Limited (ADR) (NYSE:WNS) to gather more data points.
Follow Aaon Inc. (NASDAQ:AAON)
Follow Aaon Inc. (NASDAQ:AAON)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Keeping this in mind, we’re going to take a look at the fresh action surrounding AAON, Inc. (NASDAQ:AAON).
What have hedge funds been doing with AAON, Inc. (NASDAQ:AAON)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in AAON heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
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 AAON, Inc. (NASDAQ:AAON). Renaissance Technologies has a $15.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Royce & Associates, led by Chuck Royce, holding a $6.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. 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-microcap stocks.
Since AAON, Inc. (NASDAQ:AAON) has gone through falling interest from the smart money, logic holds that there is a sect of hedge funds who sold off their entire stakes heading into Q4. Interestingly, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors sold off the biggest investment of all the hedgies tracked by Insider Monkey, worth close to $0.6 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund dropped about $0.3 million worth of shares.
Let’s check out hedge fund activity in other stocks similar to AAON, Inc. (NASDAQ:AAON). These stocks are II-VI, Inc. (NASDAQ:IIVI), Belmond Ltd (NYSE:BEL), WNS (Holdings) Limited (ADR) (NYSE:WNS), and TriNet Group Inc (NYSE:TNET). This group of stocks’ market caps are similar to AAON’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IIVI | 20 | 91987 | 2 |
| BEL | 12 | 103184 | -3 |
| WNS | 11 | 64725 | 0 |
| TNET | 14 | 124160 | -7 |
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $31 million in AAON’s case. II-VI, Inc. (NASDAQ:IIVI) is the most popular stock in this table. On the other hand WNS (Holdings) Limited (ADR) (NYSE:WNS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks AAON, Inc. (NASDAQ:AAON) is even less popular than WNS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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