We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Copa Holdings, S.A. (NYSE:CPA).
Is Copa Holdings, S.A. (NYSE:CPA) a healthy stock for your portfolio? The best stock pickers are in an optimistic mood. The number of long hedge fund positions rose by 1 recently. Our calculations also showed that CPA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). CPA was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 21 hedge funds in our database with CPA holdings at the end of the previous quarter.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the new hedge fund action regarding Copa Holdings, S.A. (NYSE:CPA).
How are hedge funds trading Copa Holdings, S.A. (NYSE:CPA)?
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CPA over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Copa Holdings, S.A. (NYSE:CPA), with a stake worth $168 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $58.4 million. Point72 Asset Management, Millennium Management, and Driehaus 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 Albar Capital allocated the biggest weight to Copa Holdings, S.A. (NYSE:CPA), around 4.66% of its 13F portfolio. Prince Street Capital Management is also relatively very bullish on the stock, earmarking 4.28 percent of its 13F equity portfolio to CPA.
Consequently, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most outsized position in Copa Holdings, S.A. (NYSE:CPA). Marshall Wace LLP had $2.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $1.3 million investment in the stock during the quarter. The following funds were also among the new CPA investors: Mike Vranos’s Ellington, Peter Muller’s PDT Partners, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Copa Holdings, S.A. (NYSE:CPA) but similarly valued. These stocks are Armstrong World Industries, Inc. (NYSE:AWI), YPF Sociedad Anonima (NYSE:YPF), The Boston Beer Company Inc (NYSE:SAM), and The Brink’s Company (NYSE:BCO). All of these stocks’ market caps resemble CPA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWI | 24 | 550330 | -6 |
| YPF | 15 | 92848 | -5 |
| SAM | 26 | 577456 | -4 |
| BCO | 24 | 453999 | 3 |
| Average | 22.25 | 418658 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $419 million. That figure was $403 million in CPA’s case. The Boston Beer Company Inc (NYSE:SAM) is the most popular stock in this table. On the other hand YPF Sociedad Anonima (NYSE:YPF) is the least popular one with only 15 bullish hedge fund positions. Copa Holdings, S.A. (NYSE:CPA) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately CPA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CPA investors were disappointed as the stock returned -56.3% during the same time period 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
