The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Applied Industrial Technologies Inc (NYSE:AIT).
Applied Industrial Technologies Inc (NYSE:AIT) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of March. Our calculations also showed that AIT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare AIT to other stocks including Diodes Incorporated (NASDAQ:DIOD), SPS Commerce, Inc. (NASDAQ:SPSC), and Bed Bath & Beyond Inc. (NASDAQ:BBBY) to get a better sense of its popularity.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Robert Atchinson of Adage Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s view the latest hedge fund action encompassing Applied Industrial Technologies Inc (NYSE:AIT).
Do Hedge Funds Think AIT Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AIT over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Applied Industrial Technologies Inc (NYSE:AIT), which was worth $12.6 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $11.2 million worth of shares. Balyasny Asset Management, Value Holdings LP, and Adage Capital Management 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 Value Holdings LP allocated the biggest weight to Applied Industrial Technologies Inc (NYSE:AIT), around 2.13% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, earmarking 0.79 percent of its 13F equity portfolio to AIT.
Due to the fact that Applied Industrial Technologies Inc (NYSE:AIT) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies who were dropping their entire stakes heading into Q2. At the top of the heap, Richard Driehaus’s Driehaus Capital cut the biggest stake of all the hedgies tracked by Insider Monkey, valued at close to $4.7 million in stock, and Mark Coe’s Intrinsic Edge Capital was right behind this move, as the fund dumped about $1.6 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Applied Industrial Technologies Inc (NYSE:AIT) but similarly valued. We will take a look at Diodes Incorporated (NASDAQ:DIOD), SPS Commerce, Inc. (NASDAQ:SPSC), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Cronos Group Inc. (NASDAQ:CRON), Ambarella Inc (NASDAQ:AMBA), Dana Incorporated (NYSE:DAN), and CareDx, Inc. (NASDAQ:CDNA). This group of stocks’ market values are closest to AIT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DIOD | 21 | 161053 | 7 |
| SPSC | 20 | 133241 | 6 |
| BBBY | 23 | 314226 | -10 |
| CRON | 10 | 126181 | -1 |
| AMBA | 35 | 286944 | -1 |
| DAN | 26 | 545924 | -2 |
| CDNA | 23 | 693239 | 3 |
| Average | 22.6 | 322973 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $323 million. That figure was $68 million in AIT’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Cronos Group Inc. (NASDAQ:CRON) is the least popular one with only 10 bullish hedge fund positions. Applied Industrial Technologies Inc (NYSE:AIT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AIT is 53.3. 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 negative signal and 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately AIT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AIT investors were disappointed as the stock returned -4.5% since the end of March (through 7/16) 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 most of these stocks already outperformed the market in 2021.
Follow Applied Industrial Technologies Inc (NYSE:AIT)
Follow Applied Industrial Technologies Inc (NYSE:AIT)
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Disclosure: None. This article was originally published at Insider Monkey.
