Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS).
Is VLRS a good stock to buy now? Hedge fund interest in Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that VLRS 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). At the end of this article we will also compare VLRS to other stocks including Scholastic Corp (NASDAQ:SCHL), GoPro Inc (NASDAQ:GPRO), and Enterprise Financial Services Corp (NASDAQ:EFSC) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are seen as worthless, outdated investment vehicles of years past. While there are over 8000 funds trading at the moment, Our researchers hone in on the leaders of this club, about 850 funds. Most estimates calculate that this group of people oversee most of the hedge fund industry’s total capital, and by observing their first-class stock picks, Insider Monkey has come up with numerous investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 go over the latest hedge fund action regarding Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS).
Do Hedge Funds Think VLRS Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in VLRS a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS) was held by Teewinot Capital Advisers, which reported holding $42 million worth of stock at the end of September. It was followed by PAR Capital Management with a $12.5 million position. Other investors bullish on the company included Renaissance Technologies, Tiger Management, and Millennium Management. In terms of the portfolio weights assigned to each position Teewinot Capital Advisers allocated the biggest weight to Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS), around 17.73% of its 13F portfolio. Cumberland Associates / Springowl Associates is also relatively very bullish on the stock, dishing out 3.06 percent of its 13F equity portfolio to VLRS.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace LLP).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS) but similarly valued. These stocks are Scholastic Corp (NASDAQ:SCHL), GoPro Inc (NASDAQ:GPRO), Enterprise Financial Services Corp (NASDAQ:EFSC), Partner Communications Company Ltd (NASDAQ:PTNR), ChipMOS Technologies Inc (NASDAQ:IMOS), CTS Corporation (NYSE:CTS), and Tactile Systems Technology, Inc. (NASDAQ:TCMD). This group of stocks’ market valuations are similar to VLRS’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $76 million in VLRS’s case. Tactile Systems Technology, Inc. (NASDAQ:TCMD) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 1 bullish hedge fund positions. Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VLRS is 52.9. 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 VLRS as the stock returned 66.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.