Hedge Funds Are Dumping Copa Holdings, S.A. (CPA)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Copa Holdings, S.A. (NYSE:CPA).

Copa Holdings, S.A. (NYSE:CPA) shareholders have witnessed a decrease in hedge fund interest lately. Our calculations also showed that CPA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Steven Cohen

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the new hedge fund action surrounding Copa Holdings, S.A. (NYSE:CPA).

How have hedgies been trading Copa Holdings, S.A. (NYSE:CPA)?

At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -32% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CPA over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is CPA A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in Copa Holdings, S.A. (NYSE:CPA), worth close to $82.5 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Point72 Asset Management, led by Steve Cohen, holding a $13.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions encompass Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and Javier Velazquez’s Albar Capital. In terms of the portfolio weights assigned to each position Albar Capital allocated the biggest weight to Copa Holdings, S.A. (NYSE:CPA), around 5.7% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, setting aside 0.42 percent of its 13F equity portfolio to CPA.

Due to the fact that Copa Holdings, S.A. (NYSE:CPA) has witnessed falling interest from hedge fund managers, we can see that there exists a select few hedgies who sold off their full holdings last quarter. Interestingly, Richard Driehaus’s Driehaus Capital said goodbye to the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at close to $26.8 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $13 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 7 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Copa Holdings, S.A. (NYSE:CPA) but similarly valued. We will take a look at RH (NYSE:RH), Liberty Latin America Ltd. (NASDAQ:LILA), Lithia Motors Inc (NYSE:LAD), and Kennedy-Wilson Holdings Inc (NYSE:KW). This group of stocks’ market valuations match CPA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RH 30 549200 -8
LILA 12 98864 1
LAD 27 388450 -2
KW 22 308206 5
Average 22.75 336180 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $336 million. That figure was $139 million in CPA’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Liberty Latin America Ltd. (NASDAQ:LILA) is the least popular one with only 12 bullish hedge fund positions. Copa Holdings, S.A. (NYSE:CPA) 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately CPA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CPA investors were disappointed as the stock returned 10.2% 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.