In this article you are going to find out whether hedge funds think Great Ajax Corp (NYSE:AJX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Great Ajax Corp (NYSE:AJX) a good stock to buy? AJX investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. Great Ajax Corp (NYSE:AJX) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. Our calculations also showed that AJX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let’s check out the latest hedge fund action regarding Great Ajax Corp (NYSE:AJX).
Hedge fund activity in Great Ajax Corp (NYSE:AJX)
At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AJX over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Almitas Capital held the most valuable stake in Great Ajax Corp (NYSE:AJX), which was worth $6.9 million at the end of the third quarter. On the second spot was Ellington which amassed $4 million worth of shares. Winton Capital Management, Renaissance Technologies, and D E Shaw 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 Almitas Capital allocated the biggest weight to Great Ajax Corp (NYSE:AJX), around 9.38% of its 13F portfolio. Ellington is also relatively very bullish on the stock, earmarking 1.39 percent of its 13F equity portfolio to AJX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Two Sigma Advisors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified AJX as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Great Ajax Corp (NYSE:AJX) but similarly valued. These stocks are North American Construction Group Ltd. (NYSE:NOA), CASI Pharmaceuticals Inc (NASDAQ:CASI), Immersion Corporation (NASDAQ:IMMR), Rekor Systems, Inc. (NASDAQ:REKR), Fluent, Inc. (NASDAQ:FLNT), Secoo Holding Limited (NASDAQ:SECO), and Protective Insurance Corporation (NASDAQ:PTVCB). This group of stocks’ market valuations resemble AJX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOA | 9 | 23376 | 0 |
| CASI | 10 | 15008 | 4 |
| IMMR | 21 | 70678 | 4 |
| REKR | 6 | 9184 | 4 |
| FLNT | 7 | 2407 | 0 |
| SECO | 4 | 9837 | -1 |
| PTVCB | 5 | 12437 | 0 |
| Average | 8.9 | 20418 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $13 million in AJX’s case. Immersion Corporation (NASDAQ:IMMR) is the most popular stock in this table. On the other hand Secoo Holding Limited (NASDAQ:SECO) is the least popular one with only 4 bullish hedge fund positions. Great Ajax Corp (NYSE:AJX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AJX is 25.7. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on AJX as the stock returned 26.1% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
