Azul S.A. (AZUL) Fell Out Of Favor With Hedge Funds

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of Azul S.A. (NYSE:AZUL) based on that data.

Is Azul S.A. (NYSE:AZUL) a healthy stock for your portfolio? The best stock pickers were reducing their bets on the stock. The number of bullish hedge fund positions shrunk by 1 lately. Azul S.A. (NYSE:AZUL) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 21. Our calculations also showed that AZUL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. Keeping this in mind let’s take a glance at the recent hedge fund action regarding Azul S.A. (NYSE:AZUL).

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

At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in AZUL over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Howard Marks’s Oaktree Capital Management has the biggest position in Azul S.A. (NYSE:AZUL), worth close to $49 million, corresponding to 0.7% of its total 13F portfolio. The second largest stake is held by ThornTree Capital Partners, managed by Mark Moore, which holds a $33.5 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Other peers that are bullish include Alex Duran and Scott Hendrickson’s Permian Investment Partners, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position ThornTree Capital Partners allocated the biggest weight to Azul S.A. (NYSE:AZUL), around 4.51% of its 13F portfolio. Permian Investment Partners is also relatively very bullish on the stock, designating 1.78 percent of its 13F equity portfolio to AZUL.

Because Azul S.A. (NYSE:AZUL) has faced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of fund managers who were dropping their entire stakes by the end of the second quarter. It’s worth mentioning that Ravee Mehta’s Nishkama Capital dumped the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $2.4 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund dumped about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds by the end of the second quarter.

Let’s go over hedge fund activity in other stocks similar to Azul S.A. (NYSE:AZUL). We will take a look at American Well Corporation (NYSE:AMWL), Werner Enterprises, Inc. (NASDAQ:WERN), Skyline Champion Corporation (NYSE:SKY), CNX Resources Corporation (NYSE:CNX), Alamos Gold Inc (NYSE:AGI), Kennametal Inc. (NYSE:KMT), and Hilltop Holdings Inc. (NYSE:HTH). This group of stocks’ market caps are similar to AZUL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $120 million in AZUL’s case. CNX Resources Corporation (NYSE:CNX) is the most popular stock in this table. On the other hand Hilltop Holdings Inc. (NYSE:HTH) is the least popular one with only 8 bullish hedge fund positions. Azul S.A. (NYSE:AZUL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AZUL is 22.8. 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 negative signal and 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 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately AZUL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AZUL investors were disappointed as the stock returned -18.8% since the end of June (through 9/27) 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 in 2021.

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