Hedge Funds Are Piling Into The AZEK Company Inc. (AZEK)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about The AZEK Company Inc. (NYSE:AZEK).

The AZEK Company Inc. (NYSE:AZEK) shareholders have witnessed an increase in enthusiasm from smart money recently. The AZEK Company Inc. (NYSE:AZEK) was in 37 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 29 hedge funds in our database with AZEK positions at the end of the first quarter. Our calculations also showed that AZEK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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 analyze the new hedge fund action surrounding The AZEK Company Inc. (NYSE:AZEK).

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

At second quarter’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in AZEK over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Zimmer Partners was the largest shareholder of The AZEK Company Inc. (NYSE:AZEK), with a stake worth $124.2 million reported as of the end of June. Trailing Zimmer Partners was Islet Management, which amassed a stake valued at $31.7 million. Interval Partners, Millennium Management, and Citadel 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 1.79% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 1.67 percent of its 13F equity portfolio to AZEK.

Now, specific money managers were breaking ground themselves. Islet Management, managed by Joseph Samuels, established the most outsized position in The AZEK Company Inc. (NYSE:AZEK). Islet Management had $31.7 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $15.3 million position during the quarter. The other funds with new positions in the stock are Alexander Mitchell’s Scopus Asset Management, Renaissance Technologies, and Matthew L Pinz’s Pinz Capital.

Let’s go over hedge fund activity in other stocks similar to The AZEK Company Inc. (NYSE:AZEK). These stocks are Woori Financial Group Inc. (NYSE:WF), People’s United Financial, Inc. (NASDAQ:PBCT), Casey’s General Stores, Inc. (NASDAQ:CASY), Coty Inc (NYSE:COTY), Tenet Healthcare Corp (NYSE:THC), STAAR Surgical Company (NASDAQ:STAA), and Euronet Worldwide, Inc. (NASDAQ:EEFT). All of these stocks’ market caps are closest to AZEK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WF 2 3694 0
PBCT 24 219174 4
CASY 24 130468 13
COTY 30 381601 5
THC 39 1860668 0
STAA 26 1637023 10
EEFT 40 368945 0
Average 26.4 657368 4.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $657 million. That figure was $408 million in AZEK’s case. Euronet Worldwide, Inc. (NASDAQ:EEFT) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 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 86.1. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 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 -13.9% since the end of June (through 10/11) 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.