In this article you are going to find out whether hedge funds think Azul S.A. (NYSE:AZUL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is AZUL a good stock to buy now? AZUL investors should be aware of a decrease in enthusiasm from smart money in recent months. Azul S.A. (NYSE:AZUL) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 21. There were 13 hedge funds in our database with AZUL positions at the end of the second quarter. Our calculations also showed that AZUL isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 today’s marketplace there are tons of formulas stock market investors put to use to value their holdings. A duo of the less utilized formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best investment managers can trounce the S&P 500 by a healthy amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing Azul S.A. (NYSE:AZUL).
Hedge fund activity in Azul S.A. (NYSE:AZUL)
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, ThornTree Capital Partners, managed by Mark Moore, holds the largest position in Azul S.A. (NYSE:AZUL). ThornTree Capital Partners has a $25.9 million position in the stock, comprising 3.7% of its 13F portfolio. Sitting at the No. 2 spot is Oaktree Capital Management, led by Howard Marks, holding a $22 million position; 0.5% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions encompass Ravee Mehta’s Nishkama Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position ThornTree Capital Partners allocated the biggest weight to Azul S.A. (NYSE:AZUL), around 3.67% of its 13F portfolio. Nishkama Capital is also relatively very bullish on the stock, setting aside 2.48 percent of its 13F equity portfolio to AZUL.
Because Azul S.A. (NYSE:AZUL) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of money managers that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management said goodbye to the largest position of the 750 funds watched by Insider Monkey, worth about $1.9 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund sold off about $0.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Azul S.A. (NYSE:AZUL) but similarly valued. These stocks are SkyWest, Inc. (NASDAQ:SKYW), Zealand Pharma A/S (NASDAQ:ZEAL), Air Transport Services Group Inc. (NASDAQ:ATSG), Addus Homecare Corporation (NASDAQ:ADUS), Virtusa Corporation (NASDAQ:VRTU), Kronos Worldwide, Inc. (NYSE:KRO), and Vector Group Ltd (NYSE:VGR). This group of stocks’ market valuations match AZUL’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $60 million in AZUL’s case. Virtusa Corporation (NASDAQ:VRTU) is the most popular stock in this table. On the other hand Zealand Pharma A/S (NASDAQ:ZEAL) is the least popular one with only 3 bullish hedge fund positions. Azul S.A. (NYSE:AZUL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AZUL is 30.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on AZUL as the stock returned 85.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.