Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about AutoZone, Inc. (NYSE:AZO) in this article.
AutoZone, Inc. (NYSE:AZO) investors should be aware of a decrease in support from the world’s most elite money managers lately. AutoZone, Inc. (NYSE:AZO) was in 34 hedge funds’ portfolios at the end of March. 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 Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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 we’re going to analyze the fresh hedge fund action surrounding AutoZone, Inc. (NYSE:AZO).
Do Hedge Funds Think AZO Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. By comparison, 45 hedge funds held shares or bullish call options in AZO a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Theleme Partners held the most valuable stake in AutoZone, Inc. (NYSE:AZO), which was worth $189.5 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $146.9 million worth of shares. Citadel Investment Group, D E Shaw, and Arrowstreet Capital 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 Theleme Partners allocated the biggest weight to AutoZone, Inc. (NYSE:AZO), around 6.34% of its 13F portfolio. BlueDrive Global Investors is also relatively very bullish on the stock, dishing out 4.95 percent of its 13F equity portfolio to AZO.
Since AutoZone, Inc. (NYSE:AZO) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies who sold off their entire stakes last quarter. Interestingly, Gabriel Plotkin’s Melvin Capital Management said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, worth about $266.7 million in stock, and David Cohen and Harold Levy’s Iridian Asset Management was right behind this move, as the fund dumped about $185.8 million worth. These moves are interesting, as total hedge fund interest fell by 10 funds last quarter.
Let’s now take a look at 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 The Trade Desk, Inc. (NASDAQ:TTD), Rockwell Automation Inc. (NYSE:ROK), Delta Air Lines, Inc. (NYSE:DAL), Nutrien Ltd. (NYSE:NTR), Xilinx, Inc. (NASDAQ:XLNX), Interactive Brokers Group, Inc. (NASDAQ:IBKR), and Public Service Enterprise Group Incorporated (NYSE:PEG). This group of stocks’ market caps are similar to AZO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTD | 35 | 812891 | 0 |
| ROK | 26 | 442334 | -9 |
| DAL | 50 | 1099712 | -8 |
| NTR | 33 | 895159 | 8 |
| XLNX | 57 | 3581332 | -9 |
| IBKR | 31 | 1456604 | 3 |
| PEG | 24 | 287434 | -4 |
| Average | 36.6 | 1225067 | -2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1225 million. That figure was $754 million in AZO’s case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand Public Service Enterprise Group Incorporated (NYSE:PEG) is the least popular one with only 24 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 28.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately AZO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AZO investors were disappointed as the stock returned 5.3% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Autozone Inc (NYSE:AZO)
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Disclosure: None. This article was originally published at Insider Monkey.
