Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is AZZ Inc (NYSE:AZZ) going to take off soon? Prominent investors are definitely becoming more confident. The number of bullish hedge fund bets that are revealed through the 13F filings went up by 1 lately. AZZ was in 10 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with AZZ holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as First Majestic Silver Corp (NYSE:AG), Chemical Financial Corporation (NASDAQ:CHFC), and DSW Inc. (NYSE:DSW) to gather more data points.
Follow Azz Inc (NYSE:AZZ)
Follow Azz Inc (NYSE:AZZ)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Photology1971/Shutterstock.com
With all of this in mind, let’s view the new action encompassing AZZ Inc (NYSE:AZZ).
How have hedgies been trading AZZ Inc (NYSE:AZZ)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AZZ over the last 5 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in AZZ Inc (NYSE:AZZ), worth close to $4.5 million, corresponding to less than 0.1% of its total 13F portfolio. Coming in second is Paul Hondros of AlphaOne Capital Partners, with a $4.2 million position; 1.4% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism encompass Mario Gabelli’s GAMCO Investors, Ken Griffin’s Citadel Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now, key money managers were breaking ground themselves. Two Sigma Advisors, led by John Overdeck and David Siegel, established the largest position in AZZ Inc (NYSE:AZZ). Two Sigma Advisors had $0.5 million invested in the company at the end of the quarter. Ed Beddow and William Tichy’s Beddow Capital Management also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’ Tudor Investment Corp, Ken Griffin’s Citadel Investment Group, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to AZZ Inc (NYSE:AZZ). These stocks are First Majestic Silver Corp (NYSE:AG), Chemical Financial Corporation (NASDAQ:CHFC), DSW Inc. (NYSE:DSW), and Werner Enterprises, Inc. (NASDAQ:WERN). This group of stocks’ market caps are closest to AZZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AG | 19 | 131473 | 9 |
| CHFC | 11 | 69100 | -1 |
| DSW | 22 | 235284 | 6 |
| WERN | 15 | 80771 | 2 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $16 million in AZZ’s case. DSW Inc. (NYSE:DSW) is the most popular stock in this table. On the other hand Chemical Financial Corporation (NASDAQ:CHFC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks AZZ Inc (NYSE:AZZ) is even less popular than CHFC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
