Did Hedge Funds Get AutoZone, Inc. (AZO) Right?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded AutoZone, Inc. (NYSE:AZO) and determine whether the smart money was really smart about this stock.

Is AutoZone, Inc. (NYSE:AZO) a splendid stock to buy now? Hedge funds were betting on the stock. The number of bullish hedge fund positions increased by 1 in recent months. AutoZone, Inc. (NYSE:AZO) was in 35 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 55. Our calculations also showed that AZO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 34 hedge funds in our database with AZO positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a gander at the new hedge fund action encompassing AutoZone, Inc. (NYSE:AZO).

Peter Rathjens of Arrowstreet Capital

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

At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 53 hedge funds with a bullish position in AZO a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, Arrowstreet Capital held the most valuable stake in AutoZone, Inc. (NYSE:AZO), which was worth $254.1 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $217.2 million worth of shares. AQR Capital Management, Renaissance Technologies, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 12th Street Asset Management allocated the biggest weight to AutoZone, Inc. (NYSE:AZO), around 5.12% of its 13F portfolio. BlueDrive Global Investors is also relatively very bullish on the stock, setting aside 2.71 percent of its 13F equity portfolio to AZO.

As one would reasonably expect, key hedge funds were breaking ground themselves. Renaissance Technologies, established the most valuable position in AutoZone, Inc. (NYSE:AZO). Renaissance Technologies had $161.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $28.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Paul Tudor Jones’s Tudor Investment Corp, and David Costen Haley’s HBK Investments.

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 Unity Software Inc. (NYSE:U), DuPont de Nemours Inc (NYSE:DD), KKR & Co Inc. (NYSE:KKR), Otis Worldwide Corporation (NYSE:OTIS), AFLAC Incorporated (NYSE:AFL), The Hershey Company (NYSE:HSY), and NatWest Group plc (NYSE:NWG). This group of stocks’ market caps are closest to AZO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $2538 million. That figure was $1020 million in AZO’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 7 bullish hedge fund positions. AutoZone, Inc. (NYSE:AZO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AZO is 53.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on AZO as the stock returned 17% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.

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