After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 28. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards AutoZone, Inc. (NYSE:AZO).
AutoZone, Inc. (NYSE:AZO) investors should pay attention to a decrease in support from the world’s most elite money managers of late. AZO was in 37 hedge funds’ portfolios at the end of the second quarter of 2019. There were 42 hedge funds in our database with AZO holdings at the end of the previous quarter. Our calculations also showed that AZO isn’t among the 30 most popular stocks among hedge funds.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. Let’s go over the latest hedge fund action regarding AutoZone, Inc. (NYSE:AZO).
How are hedge funds trading AutoZone, Inc. (NYSE:AZO)?
At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in AZO a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in AutoZone, Inc. (NYSE:AZO) was held by AQR Capital Management, which reported holding $237.7 million worth of stock at the end of March. It was followed by Iridian Asset Management with a $193.9 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and D E Shaw.
Because AutoZone, Inc. (NYSE:AZO) has faced falling interest from the smart money, we can see that there lies a certain “tier” of fund managers that slashed their entire stakes in the second quarter. Intriguingly, Brandon Haley’s Holocene Advisors sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $103.7 million in stock. James Parsons’s fund, Junto Capital Management, also dumped its stock, about $38.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 5 funds in the second quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AutoZone, Inc. (NYSE:AZO) but similarly valued. These stocks are Barrick Gold Corporation (NYSE:GOLD), Sirius XM Holdings Inc (NASDAQ:SIRI), Cummins Inc. (NYSE:CMI), and Coca-Cola European Partners plc (NYSE:CCEP). This group of stocks’ market values are closest to AZO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GOLD | 39 | 1162700 | 2 |
| SIRI | 29 | 1238935 | -3 |
| CMI | 45 | 1127412 | 3 |
| CCEP | 10 | 133381 | -3 |
| Average | 30.75 | 915607 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $916 million. That figure was $1123 million in AZO’s case. Cummins Inc. (NYSE:CMI) is the most popular stock in this table. On the other hand Coca-Cola European Partners plc (NYSE:CCEP) is the least popular one with only 10 bullish hedge fund positions. AutoZone, Inc. (NYSE:AZO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately AZO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AZO were disappointed as the stock returned -1.4% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
