This Hedge Fund’s FMV Estimate of Grupo Aeroportuario del Sureste (ASR) Says It’s 75% Undervalued

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30. In this article, we look at what those funds think of Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) based on that data.

Mexican airport holding company Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) was not highly thought of by many hedge funds as of September 30, as just 3 of the funds tracked by our database were shareholders of the company. In Trapeze Asset Management’s Q3 Investor Letter, the fund discussed its long position in ASR, noting the company’s improving margins and further growth opportunities.

“Mexico-US relations and airport regulation uncertainty has led to the undervaluation of an exceptionally resilient infrastructure and retail asset amidst a government change that appears business unfriendly. Meanwhile, the company is increasingly changing its sales mix towards higher margin commercial revenue which is driving margin expansion, in addition to operating leverage from greater traffic in a country where flights per capita are meaningfully lower than North American counterparts. Cancun recently expanded capacity to support incremental growth, San Juan is recovering from Hurricane Maria, and the integration of the recently acquired Colombian group should provide additional value to the company as management improves operational efficiencies at these historically mismanaged airports. Our FMV estimate is at $240.”

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 flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


How are hedge funds trading Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 25% decline from the end of the second quarter of 2018.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR). Renaissance Technologies has a $8.4 million position in the stock. The second most bullish fund manager is Michael Moriarty of Teewinot Capital Advisers, with a $5.1 million position; 1.6% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism include Cliff Asness’ AQR Capital Management.

We view hedge fund activity in the stock as unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. 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 700+ hedge funds tracked by Insider Monkey identified it as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) but similarly valued. These stocks are Knight-Swift Transportation Holdings Inc. (NYSE:KNX), Pure Storage, Inc. (NYSE:PSTG), BlackBerry Limited (NYSE:BB), and Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC). This group of stocks’ market valuations are closest to ASR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KNX 31 411617 -6
PSTG 31 666311 4
BB 18 932206 -4
PAC 5 82276 2

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $523 million. That figure was $18 million in ASR’s case. Knight Transportation (NYSE:KNX) and Pure Storage, Inc. (NYSE:PSTG) are the most popular stocks in this table. On the other hand Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC) is the least popular one with only 5 bullish hedge fund positions. Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is even less popular than PAC, making it a risky proposition. We would hold off until more members of the smart money start seeing untapped value in ASR.

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