Is AutoZone (AZO) Stock A Buy or Sell?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards AutoZone, Inc. (NYSE:AZO).

Is AZO stock a buy or sell? AutoZone, Inc. (NYSE:AZO) shareholders have witnessed a decrease in hedge fund sentiment recently. AutoZone, Inc. (NYSE:AZO) was in 44 hedge funds’ portfolios at the end of December. The all time high for this statistic is 55. There were 53 hedge funds in our database with AZO positions at the end of the third quarter. Our calculations also showed that AZO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset Management

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

At fourth quarter’s end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the third quarter of 2020. On the other hand, there were a total of 40 hedge funds with a bullish position in AZO a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in AutoZone, Inc. (NYSE:AZO) was held by Melvin Capital Management, which reported holding $266.7 million worth of stock at the end of December. It was followed by Iridian Asset Management with a $185.8 million position. Other investors bullish on the company included Point72 Asset Management, Theleme Partners, and AQR Capital Management. In terms of the portfolio weights assigned to each position Masterton Capital Management allocated the biggest weight to AutoZone, Inc. (NYSE:AZO), around 8.86% of its 13F portfolio. Franklin Street Capital is also relatively very bullish on the stock, setting aside 5.33 percent of its 13F equity portfolio to AZO.

Due to the fact that AutoZone, Inc. (NYSE:AZO) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedgies that decided to sell off their full holdings by the end of the fourth quarter. Intriguingly, Brandon Haley’s Holocene Advisors sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $156.5 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also cut its stock, about $41.5 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 9 funds by the end of the fourth quarter.

Let’s now review 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 Welltower Inc. (NYSE:WELL), Waste Connections, Inc. (NYSE:WCN), Marathon Petroleum Corp (NYSE:MPC), Zscaler, Inc. (NASDAQ:ZS), Ecopetrol S.A. (NYSE:EC), Interactive Brokers Group, Inc. (NASDAQ:IBKR), and Paycom Software Inc (NYSE:PAYC). This group of stocks’ market caps are closest to AZO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WELL 26 538410 1
WCN 35 626810 3
MPC 43 1883612 -13
ZS 35 1208264 9
EC 7 102902 0
IBKR 28 1108907 0
PAYC 35 748935 -3
Average 29.9 888263 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $888 million. That figure was $1446 million in AZO’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks AutoZone, Inc. (NYSE:AZO) is more popular among hedge funds. Our overall hedge fund sentiment score for AZO is 70. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on AZO as the stock returned 11.8% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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