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Were Hedge Funds Right About Buying Azul S.A. (AZUL)?

The financial regulations require hedge funds and wealthy investors that crossed the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 28th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Azul S.A. (NYSE:AZUL) based on those filings.

Azul S.A. (NYSE:AZUL) was in 13 hedge funds’ portfolios at the end of the second quarter of 2019. AZUL has seen an increase in activity from the world’s largest hedge funds in recent months. There were 12 hedge funds in our database with AZUL positions at the end of the previous quarter. Our calculations also showed that AZUL isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the latest hedge fund action surrounding Azul S.A. (NYSE:AZUL).

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

Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AZUL over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AZUL Positions

According to Insider Monkey’s hedge fund database, Howard Marks’s Oaktree Capital Management has the biggest position in Azul S.A. (NYSE:AZUL), worth close to $50.7 million, amounting to 1% of its total 13F portfolio. On Oaktree Capital Management’s heels is Millennium Management, led by Israel Englander, holding a $35.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Mark Moore’s ThornTree Capital Partners and Jon Bauer’s Contrarian Capital.

As aggregate interest increased, key hedge funds were breaking ground themselves. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, initiated the largest position in Azul S.A. (NYSE:AZUL). Springbok Capital had $0.6 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Paul Tudor Jones’s Tudor Investment Corp.

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 Outfront Media Inc (NYSE:OUT), Pebblebrook Hotel Trust (NYSE:PEB), Umpqua Holdings Corporation (NASDAQ:UMPQ), and LogMeIn Inc (NASDAQ:LOGM). All of these stocks’ market caps are similar to AZUL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OUT 22 343646 -3
PEB 13 98272 3
UMPQ 20 212334 0
LOGM 27 400281 0
Average 20.5 263633 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $174 million in AZUL’s case. LogMeIn Inc (NASDAQ:LOGM) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Azul S.A. (NYSE:AZUL) is even less popular than PEB. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on AZUL as the stock returned 7.1% during the third quarter and outperformed the market by an even larger margin.

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

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