How do we determine whether AZZ Incorporated (NYSE:AZZ) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is AZZ Incorporated (NYSE:AZZ) a buy, sell, or hold? Prominent investors are betting on the stock. The number of bullish hedge fund bets advanced by 1 in recent months. Our calculations also showed that AZZ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AZZ was in 15 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with AZZ holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the fresh hedge fund action encompassing AZZ Incorporated (NYSE:AZZ).
What have hedge funds been doing with AZZ Incorporated (NYSE:AZZ)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in AZZ a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in AZZ Incorporated (NYSE:AZZ) was held by Renaissance Technologies, which reported holding $11.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $11.3 million position. Other investors bullish on the company included Rutabaga Capital Management, GAMCO Investors, and D E Shaw. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to AZZ Incorporated (NYSE:AZZ), around 2.64% of its 13F portfolio. Beddow Capital Management is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to AZZ.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Marshall Wace, managed by Paul Marshall and Ian Wace, established the most valuable position in AZZ Incorporated (NYSE:AZZ). Marshall Wace had $2 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Donald Sussman’s Paloma Partners, and Mark Coe’s Intrinsic Edge Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as AZZ Incorporated (NYSE:AZZ) but similarly valued. We will take a look at Radware Ltd. (NASDAQ:RDWR), Orchard Therapeutics plc (NASDAQ:ORTX), Marten Transport, Ltd (NASDAQ:MRTN), and Cision Ltd. (NYSE:CISN). This group of stocks’ market valuations resemble AZZ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDWR | 15 | 309696 | -1 |
| ORTX | 19 | 287447 | -2 |
| MRTN | 22 | 60918 | 4 |
| CISN | 24 | 84267 | 3 |
| Average | 20 | 185582 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $46 million in AZZ’s case. Cision Ltd. (NYSE:CISN) is the most popular stock in this table. On the other hand Radware Ltd. (NASDAQ:RDWR) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks AZZ Incorporated (NYSE:AZZ) is even less popular than RDWR. Hedge funds dodged a bullet by taking a bearish stance towards AZZ. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AZZ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AZZ investors were disappointed as the stock returned -12.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
