Was The Smart Money Right About Aerojet Rocketdyne Holdings Inc (AJRD)?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) was in 33 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 36. Our calculations also showed that AJRD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind let’s view the key hedge fund action regarding Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).

Warren Lichtenstein of Steel Partners

Do Hedge Funds Think AJRD Is A Good Stock To Buy Now?

At third quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AJRD over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Warren Lichtenstein’s Steel Partners has the number one position in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), worth close to $172 million, comprising 45.6% of its total 13F portfolio. The second most bullish fund manager is Magnetar Capital, managed by Alec Litowitz and Ross Laser, which holds a $118.9 million position; 1.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions consist of Robert Emil Zoellner’s Alpine Associates, Mario Gabelli’s GAMCO Investors and Michel Massoud’s Melqart Asset Management. In terms of the portfolio weights assigned to each position Steel Partners allocated the biggest weight to Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), around 45.59% of its 13F portfolio. Melqart Asset Management is also relatively very bullish on the stock, setting aside 4.26 percent of its 13F equity portfolio to AJRD.

As one would reasonably expect, key money managers were breaking ground themselves. Sand Grove Capital Partners, managed by Simon Davies, established the most valuable position in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). Sand Grove Capital Partners had $4.5 million invested in the company at the end of the quarter. Wayne Yu’s BCK Capital also initiated a $4.3 million position during the quarter. The following funds were also among the new AJRD investors: Orkun Kilic’s Berry Street Capital, Carl Tiedemann and Michael Tiedemann’s TIG Advisors, and Lee Ainslie’s Maverick Capital.

Let’s check out hedge fund activity in other stocks similar to Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). These stocks are LGI Homes Inc (NASDAQ:LGIH), Rogers Corporation (NYSE:ROG), Surgery Partners, Inc. (NASDAQ:SGRY), Phillips Edison & Company Inc. (NASDAQ:PECO), New Oriental Education & Technology Group Inc. (NYSE:EDU), Applied Industrial Technologies Inc (NYSE:AIT), and The Beauty Health Company (NASDAQ:SKIN). This group of stocks’ market valuations match AJRD’s market valuation.

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As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $765 million in AJRD’s case. The Beauty Health Company (NASDAQ:SKIN) is the most popular stock in this table. On the other hand Rogers Corporation (NYSE:ROG) is the least popular one with only 14 bullish hedge fund positions. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AJRD is 74.5. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, AJRD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AJRD were disappointed as the stock returned -11.4% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.