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Were Hedge Funds Right About Astronics Corporation (ATRO)?

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In this article we are going to use hedge fund sentiment as a tool and determine whether Astronics Corporation (NASDAQ:ATRO) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Astronics Corporation (NASDAQ:ATRO) a buy right now? Prominent investors were reducing their bets on the stock. The number of long hedge fund positions went down by 4 recently. Astronics Corporation (NASDAQ:ATRO) was in 17 hedge funds' portfolios at the end of March. The all time high for this statistic is 23. Our calculations also showed that ATRO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Fred DiSanto Ancora Advisors
Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 analyze the new hedge fund action encompassing Astronics Corporation (NASDAQ:ATRO).

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

At Q1's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ATRO over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Paradice Investment Management was the largest shareholder of Astronics Corporation (NASDAQ:ATRO), with a stake worth $23 million reported as of the end of March. Trailing Paradice Investment Management was Royce & Associates, which amassed a stake valued at $14.3 million. Bares Capital Management, Minerva Advisors, 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 Minerva Advisors allocated the biggest weight to Astronics Corporation (NASDAQ:ATRO), around 3.32% of its 13F portfolio. Roubaix Capital is also relatively very bullish on the stock, designating 2.01 percent of its 13F equity portfolio to ATRO.

Because Astronics Corporation (NASDAQ:ATRO) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers who sold off their positions entirely in the first quarter. Interestingly, Renaissance Technologies cut the biggest investment of the "upper crust" of funds monitored by Insider Monkey, worth close to $2.2 million in stock, and Charles de Vaulx's International Value Advisers was right behind this move, as the fund cut about $1.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds in the first quarter.

Let's now take a look at hedge fund activity in other stocks similar to Astronics Corporation (NASDAQ:ATRO). These stocks are Spero Therapeutics, Inc (NASDAQ:SPRO), China Online Education Group (NYSE:COE), Verona Pharma plc (NASDAQ:VRNA), Hooker Furniture Corporation (NASDAQ:HOFT), BeyondSpring, Inc. (NASDAQ:BYSI), Phoenix Tree Holdings Limited (NYSE:DNK), and CVR Partners LP (NYSE:UAN). This group of stocks' market caps match ATRO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPRO,7,103628,-2 COE,3,13897,-1 VRNA,12,182300,0 HOFT,6,111433,-2 BYSI,12,9688,3 DNK,4,86375,-1 UAN,3,10443,2 Average,6.7,73966,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.7 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $84 million in ATRO's case. Verona Pharma plc (NASDAQ:VRNA) is the most popular stock in this table. On the other hand China Online Education Group (NYSE:COE) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Astronics Corporation (NASDAQ:ATRO) is more popular among hedge funds. Our overall hedge fund sentiment score for ATRO is 73.2. 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 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately ATRO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ATRO were disappointed as the stock returned -3.4% since the end of the first quarter (through 7/23) 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 since 2019.

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

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