Hedge Funds Aren’t Crazy About Afya Limited (AFYA) Anymore

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Afya Limited (NASDAQ:AFYA).

Is Afya Limited (NASDAQ:AFYA) a worthy stock to buy now? Investors who are in the know were cutting their exposure. The number of bullish hedge fund positions shrunk by 3 lately. Afya Limited (NASDAQ:AFYA) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 9. Our calculations also showed that AFYA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Paul Marshall of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the new hedge fund action encompassing Afya Limited (NASDAQ:AFYA).

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

At first quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AFYA over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Millennium Management, managed by Israel Englander, holds the number one position in Afya Limited (NASDAQ:AFYA). Millennium Management has a $4.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, which holds a $3.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Renaissance Technologies, Paul Marshall and Ian Wace’s Marshall Wace LLP and Greg Eisner’s Engineers Gate Manager. In terms of the portfolio weights assigned to each position Polar Capital allocated the biggest weight to Afya Limited (NASDAQ:AFYA), around 0.02% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to AFYA.

Judging by the fact that Afya Limited (NASDAQ:AFYA) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that slashed their positions entirely in the first quarter. At the top of the heap, Howard Marks’s Oaktree Capital Management dropped the largest investment of all the hedgies watched by Insider Monkey, worth about $45 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $0.6 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds in the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Afya Limited (NASDAQ:AFYA) but similarly valued. These stocks are Victory Capital Holdings, Inc. (NASDAQ:VCTR), Tri Continental Corporation (NYSE:TY), OSI Systems, Inc. (NASDAQ:OSIS), M/I Homes Inc (NYSE:MHO), Palomar Holdings, Inc. (NASDAQ:PLMR), Nexgen Energy Ltd. (NYSE:NXE), and BioAtla, Inc. (NASDAQ:BCAB). This group of stocks’ market caps match AFYA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $12 million in AFYA’s case. OSI Systems, Inc. (NASDAQ:OSIS) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 2 bullish hedge fund positions. Afya Limited (NASDAQ:AFYA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AFYA is 27. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on AFYA as the stock returned 42.9% since the end of the first quarter (through 6/18) and outperformed the market by an even larger margin.

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