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Hedge Funds Are Dumping AutoZone, Inc. (NYSE:AZO)

AutoZone, Inc. (NYSE:AZO) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late.

AutoZone Needs a Tune UpTo most market participants, hedge funds are perceived as worthless, old financial vehicles of the past. While there are more than 8000 funds trading today, we at Insider Monkey look at the upper echelon of this group, about 450 funds. It is estimated that this group has its hands on the majority of the hedge fund industry’s total asset base, and by paying attention to their top equity investments, we have discovered a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Equally as important, optimistic insider trading sentiment is another way to break down the world of equities. Just as you’d expect, there are plenty of stimuli for a corporate insider to drop shares of his or her company, but just one, very clear reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this method if investors understand what to do (learn more here).

Consequently, let’s take a peek at the key action surrounding AutoZone, Inc. (NYSE:AZO).

How are hedge funds trading AutoZone, Inc. (NYSE:AZO)?

At year’s end, a total of 39 of the hedge funds we track were bullish in this stock, a change of -15% from the third quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes substantially.

Of the funds we track, Brookside Capital, managed by Bain Capital, holds the most valuable position in AutoZone, Inc. (NYSE:AZO). Brookside Capital has a $214 million billion position in the stock, comprising 4.8% of its 13F portfolio. Sitting at the No. 2 spot is Andreas Halvorsen of Viking Global, with a $207 million position; 4.8% of its 13F portfolio is allocated to the company. Remaining hedgies that are bullish include David Cohen and Harold Levy’s Iridian Asset Management, Christian Leone’s Luxor Capital Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Judging by the fact that AutoZone, Inc. (NYSE:AZO) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that decided to sell off their positions entirely last quarter. Intriguingly, Stephen Mandel’s Lone Pine Capital cut the largest investment of the “upper crust” of funds we watch, valued at close to $319 million in stock.. Bain Capital’s fund, Brookside Capital, also dumped its stock, about $100 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds last quarter.

What do corporate executives and insiders think about AutoZone, Inc. (NYSE:AZO)?

Insider purchases made by high-level executives is particularly usable when the primary stock in question has experienced transactions within the past half-year. Over the latest 180-day time period, AutoZone, Inc. (NYSE:AZO) has experienced zero unique insiders buying, and 16 insider sales (see the details of insider trades here).

With the returns shown by Insider Monkey’s strategies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and AutoZone, Inc. (NYSE:AZO) applies perfectly to this mantra.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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