Should You Avoid Actuant Corporation (ATU)?

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Is Actuant Corporation (NYSE:ATU) undervalued? Money managers are becoming less hopeful. The number of long hedge fund bets decreased by 6 in recent months. ATU was in 14 hedge funds’ portfolios at the end of the third quarter of 2015. There were 20 hedge funds in our database with ATU positions at the end of the previous quarter. At the end of this article we will also compare ATU to other stocks including Shutterstock Inc (NYSE:SSTK), CNOOC Limited (ADR) (NYSE:CEO), and The Ensign Group, Inc. (NASDAQ:ENSG) to get a better sense of its popularity.

In the eyes of most shareholders, hedge funds are viewed as underperforming, outdated investment vehicles of years past. While there are over 8000 funds in operation today, our researchers hone in on the top tier of this group, approximately 700 funds. These investment experts direct bulk of all hedge funds’ total capital, and by shadowing their inimitable equity investments, Insider Monkey has come up with a few investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to go over the recent action regarding Actuant Corporation (NYSE:ATU).

What have hedge funds been doing with Actuant Corporation (NYSE:ATU)?

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the second quarter. With hedge funds’ capital changing hands, there exist a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Mason Hawkins’s Southeastern Asset Management has the most valuable position in Actuant Corporation (NYSE:ATU), worth close to $97.1 million, corresponding to 0.8% of its total 13F portfolio. Coming in second is Richard S. Pzena of Pzena Investment Management, with an $50.3 million position; 0.3% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions contain Lee Munder’s Lee Munder Capital Group, Jeffrey Bronchick’s Cove Street Capital and Ken Griffin’s Citadel Investment Group.

Seeing as Actuant Corporation (NYSE:ATU) has faced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that decided to sell off their entire stakes heading into Q4. Intriguingly, Israel Englander’s Millennium Management dumped the biggest position of all the hedgies watched by Insider Monkey, valued at about $9.3 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also dumped its stock, about $7.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 6 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Actuant Corporation (NYSE:ATU) but similarly valued. These stocks are Shutterstock Inc (NYSE:SSTK), CNOOC Limited (ADR) (NYSE:CEO), The Ensign Group, Inc. (NASDAQ:ENSG), and Precision Drilling Corp (USA) (NYSE:PDS). This group of stocks’ market values are closest to ATU’s market value.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $195 million in ATU’s case. Shutterstock Inc (NYSE:SSTK) is the most popular stock in this table, while Precision Drilling Corp (USA) (NYSE:PDS) is the least popular one. Among all the stocks in this group, Actuant Corporation (NYSE:ATU) is the most popular one, with 14 bullish hedge fund positions. This may indicate that this stock is worth to buy, which is why it may be a good idea to analyze it in detail and potentially include it in your portfolio.