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Azure Power Global Limited (AZRE): Hedge Fund Sentiment Unchanged

In this article you are going to find out whether hedge funds think Azure Power Global Limited (NYSE:AZRE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Azure Power Global Limited (NYSE:AZRE) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of March. At the end of this article we will also compare AZRE to other stocks including CNX Midstream Partners LP (NYSE:CNXM), Encore Capital Group, Inc. (NASDAQ:ECPG), and Neenah, Inc. (NYSE:NP) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are seen as unimportant, old financial tools of yesteryear. While there are over 8000 funds with their doors open at present, We hone in on the moguls of this club, around 850 funds. It is estimated that this group of investors direct the lion’s share of the hedge fund industry’s total asset base, and by watching their inimitable picks, Insider Monkey has revealed various investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Philip Hempleman Ardsley Partners

Philip Hempleman of Ardsley Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the recent hedge fund action regarding Azure Power Global Limited (NYSE:AZRE).

How have hedgies been trading Azure Power Global Limited (NYSE:AZRE)?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AZRE over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Millennium Management, managed by Israel Englander, holds the number one position in Azure Power Global Limited (NYSE:AZRE). Millennium Management has a $3.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot of Renaissance Technologies, with a $3.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish encompass Till Bechtolsheimer’s Arosa Capital Management, Philip Hempleman’s Ardsley Partners and . In terms of the portfolio weights assigned to each position Arosa Capital Management allocated the biggest weight to Azure Power Global Limited (NYSE:AZRE), around 0.32% of its 13F portfolio. Ardsley Partners is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to AZRE.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arosa Capital Management).

Let’s also examine hedge fund activity in other stocks similar to Azure Power Global Limited (NYSE:AZRE). We will take a look at CNX Midstream Partners LP (NYSE:CNXM), Encore Capital Group, Inc. (NASDAQ:ECPG), Neenah, Inc. (NYSE:NP), and Welbilt, Inc. (NYSE:WBT). This group of stocks’ market valuations are closest to AZRE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNXM 2 7681 -3
ECPG 15 37246 2
NP 13 22734 2
WBT 25 198010 -3
Average 13.75 66418 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $10 million in AZRE’s case. Welbilt, Inc. (NYSE:WBT) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 2 bullish hedge fund positions. Azure Power Global Limited (NYSE:AZRE) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately AZRE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AZRE investors were disappointed as the stock returned -3.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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