Hedge Funds Never Been Less Bullish On Azul S.A. (AZUL)

In this article we will take a look at whether hedge funds think Azul S.A. (NYSE:AZUL) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Azul S.A. (NYSE:AZUL) investors should be aware of a decrease in hedge fund sentiment in recent months. Our calculations also showed that AZUL 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.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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 let’s check out the key hedge fund action regarding Azul S.A. (NYSE:AZUL).

How have hedgies been trading Azul S.A. (NYSE:AZUL)?

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in AZUL a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AZUL A Good Stock To Buy?

More specifically, ThornTree Capital Partners was the largest shareholder of Azul S.A. (NYSE:AZUL), with a stake worth $20.6 million reported as of the end of September. Trailing ThornTree Capital Partners was Oaktree Capital Management, which amassed a stake valued at $13.6 million. ZWEIG DIMENNA PARTNERS, Citadel Investment Group, and Renaissance Technologies 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 ThornTree Capital Partners allocated the biggest weight to Azul S.A. (NYSE:AZUL), around 5.73% of its 13F portfolio. ZWEIG DIMENNA PARTNERS is also relatively very bullish on the stock, designating 1.4 percent of its 13F equity portfolio to AZUL.

Since Azul S.A. (NYSE:AZUL) has faced a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of funds that decided to sell off their full holdings by the end of the first quarter. Intriguingly, Richard Driehaus’s Driehaus Capital dropped the largest investment of all the hedgies followed by Insider Monkey, comprising an estimated $31.2 million in stock, and Jon Bauer’s Contrarian Capital was right behind this move, as the fund dumped about $29.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Azul S.A. (NYSE:AZUL) but similarly valued. We will take a look at Delek US Holdings, Inc. (NYSE:DK), Xenia Hotels & Resorts Inc (NYSE:XHR), Steelcase Inc. (NYSE:SCS), and First Bancorp (NYSE:FBP). This group of stocks’ market values are closest to AZUL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DK 16 202953 -3
XHR 8 12427 -3
SCS 23 64288 -7
FBP 24 132891 -8
Average 17.75 103140 -5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $49 million in AZUL’s case. First Bancorp (NYSE:FBP) is the most popular stock in this table. On the other hand Xenia Hotels & Resorts Inc (NYSE:XHR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Azul S.A. (NYSE:AZUL) is even less popular than XHR. Hedge funds clearly dropped the ball on AZUL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on AZUL as the stock returned 26.1% so far in the second quarter and outperformed the market by an even larger margin.

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