Hedge Funds Are Undecided About AutoZone, Inc. (AZO)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about AutoZone, Inc. (NYSE:AZO) in this article.

AutoZone, Inc. (NYSE:AZO) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. AZO was in 35 hedge funds’ portfolios at the end of the third quarter of 2019. There were 37 hedge funds in our database with AZO positions at the end of the previous quarter. Our calculations also showed that AZO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are assumed to be unimportant, outdated investment vehicles of the past. While there are over 8000 funds trading at the moment, We hone in on the top tier of this group, approximately 750 funds. These money managers manage most of the hedge fund industry’s total capital, and by watching their matchless equity investments, Insider Monkey has brought to light numerous investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the fresh hedge fund action encompassing AutoZone, Inc. (NYSE:AZO).

Hedge fund activity in AutoZone, Inc. (NYSE:AZO)

Heading into the fourth quarter of 2019, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2019. By comparison, 30 hedge funds held shares or bullish call options in AZO 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.

No of Hedge Funds with AZO Positions

The largest stake in AutoZone, Inc. (NYSE:AZO) was held by Iridian Asset Management, which reported holding $251.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $227 million position. Other investors bullish on the company included Renaissance Technologies, AQR Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position BlueDrive Global Investors allocated the biggest weight to AutoZone, Inc. (NYSE:AZO), around 7.39% of its portfolio. Iridian Asset Management is also relatively very bullish on the stock, earmarking 3.94 percent of its 13F equity portfolio to AZO.

Seeing as AutoZone, Inc. (NYSE:AZO) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of fund managers who were dropping their full holdings last quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, valued at about $24.2 million in stock. Clint Carlson’s fund, Carlson Capital, also dropped its stock, about $16.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AutoZone, Inc. (NYSE:AZO) but similarly valued. We will take a look at FirstEnergy Corp. (NYSE:FE), Verisk Analytics, Inc. (NASDAQ:VRSK), Discover Financial Services (NYSE:DFS), and Cummins Inc. (NYSE:CMI). This group of stocks’ market valuations match AZO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FE 32 2451597 -2
VRSK 30 668085 0
DFS 37 935893 -2
CMI 31 857313 -14
Average 32.5 1228222 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1228 million. That figure was $1329 million in AZO’s case. Discover Financial Services (NYSE:DFS) is the most popular stock in this table. On the other hand Verisk Analytics, Inc. (NASDAQ:VRSK) is the least popular one with only 30 bullish hedge fund positions. AutoZone, Inc. (NYSE:AZO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on AZO, though not to the same extent, as the stock returned 8.6% during the first two months of the fourth quarter and outperformed the market as well.

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