It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS).
Controladora Vuela Co Avcn SA CV (ADR) was in 12 hedge funds’ portfolios at the end of the third quarter of 2015. VLRS investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 9 hedge funds in our database with VLRS holdings at the end of the previous quarter. At the end of this article we will also compare VLRS to other stocks including Charles River Laboratories (NYSE:CRL), Leidos Holdings Inc (NYSE:LDOS), and EPR Properties (NYSE:EPR) to get a better sense of its popularity.
Now, we’re going to view the key action regarding Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS).
What have hedge funds been doing with Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, PAR Capital Management, managed by Paul Reeder and Edward Shapiro, holds the biggest position in Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS). PAR Capital Management has a $16.4 million position in the stock, comprising 0.3% of its 13F portfolio. On PAR Capital Management’s heels is Michael Moriarty of Teewinot Capital Advisers, with a $12 million position; 8.5% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions comprise Richard Driehaus’s Driehaus Capital, Robert B. Gillam’s McKinley Capital Management and Rob Citrone’s Discovery Capital Management.
Consequently, specific money managers have been driving this bullishness. McKinley Capital Management, managed by Robert B. Gillam, assembled the biggest position in Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS). McKinley Capital Management had $5.9 million invested in the company at the end of the quarter. Rob Citrone’s Discovery Capital Management also made a $4.6 million investment in the stock during the quarter. The only other fund with a brand new VLRS position is Julian Robertson’s Tiger Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) but similarly valued. We will take a look at Charles River Laboratories (NYSE:CRL), Leidos Holdings Inc (NYSE:LDOS), EPR Properties (NYSE:EPR), and YY Inc (ADR) (NASDAQ:YY). This group of stocks’ market valuations are similar to VLRS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRL | 27 | 397360 | -3 |
| LDOS | 24 | 116818 | 1 |
| EPR | 18 | 184115 | 3 |
| YY | 18 | 147741 | -7 |
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $59 million in VLRS’s case. Charles River Laboratories (NYSE:CRL) is the most popular stock in this table. On the other hand EPR Properties (NYSE:EPR) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) is even less popular than EPR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.