Hedge Funds Are Betting On The AZEK Company Inc. (AZEK)

In this article we will check out the progression of hedge fund sentiment towards The AZEK Company Inc. (NYSE:AZEK) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

The AZEK Company Inc. (NYSE:AZEK) has experienced an increase in hedge fund interest of late. The AZEK Company Inc. (NYSE:AZEK) was in 29 hedge funds’ portfolios at the end of March. The all time high for this statistic is 34. There were 23 hedge funds in our database with AZEK positions at the end of the fourth quarter. Our calculations also showed that AZEK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

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. Now we’re going to take a peek at the fresh hedge fund action regarding The AZEK Company Inc. (NYSE:AZEK).

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

At first quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in AZEK a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AZEK A Good Stock To Buy?

More specifically, Zimmer Partners was the largest shareholder of The AZEK Company Inc. (NYSE:AZEK), with a stake worth $72.1 million reported as of the end of March. Trailing Zimmer Partners was Citadel Investment Group, which amassed a stake valued at $46.4 million. Holocene Advisors, ZWEIG DIMENNA PARTNERS, and Alyeska Investment Group 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 Stormborn Capital Management allocated the biggest weight to The AZEK Company Inc. (NYSE:AZEK), around 3.04% of its 13F portfolio. ZWEIG DIMENNA PARTNERS is also relatively very bullish on the stock, dishing out 1.26 percent of its 13F equity portfolio to AZEK.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into The AZEK Company Inc. (NYSE:AZEK) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in The AZEK Company Inc. (NYSE:AZEK). Balyasny Asset Management had $11.5 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $4.2 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Jinghua Yan’s TwinBeech Capital, and Qing Li’s Sciencast Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The AZEK Company Inc. (NYSE:AZEK) but similarly valued. We will take a look at Wyndham Hotels & Resorts, Inc. (NYSE:WH), ANGI Homeservices Inc (NASDAQ:ANGI), Littelfuse, Inc. (NASDAQ:LFUS), Penske Automotive Group, Inc. (NYSE:PAG), Life Storage, Inc. (NYSE:LSI), OGE Energy Corp. (NYSE:OGE), and JetBlue Airways Corporation (NASDAQ:JBLU). This group of stocks’ market caps are similar to AZEK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WH 24 838355 -2
ANGI 35 309329 4
LFUS 21 451577 0
PAG 12 188294 -9
LSI 26 214869 9
OGE 23 119911 3
JBLU 29 425689 0
Average 24.3 364003 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $364 million. That figure was $252 million in AZEK’s case. ANGI Homeservices Inc (NASDAQ:ANGI) is the most popular stock in this table. On the other hand Penske Automotive Group, Inc. (NYSE:PAG) is the least popular one with only 12 bullish hedge fund positions. The AZEK Company Inc. (NYSE:AZEK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AZEK is 72.5. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately AZEK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AZEK were disappointed as the stock returned -2.3% since the end of March (through 7/2) 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 many of these stocks already outperformed the market since 2019.

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