Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS).
Is Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) worth your attention right now? The best stock pickers are turning bullish. The number of bullish hedge fund bets strengthened by 3 in recent months. VLRS was in 14 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with VLRS positions at the end of the previous quarter. At the end of this article we will also compare VLRS to other stocks including Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Finisar Corporation (NASDAQ:FNSR), and KBR, Inc. (NYSE:KBR) to get a better sense of its popularity.
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Hedge fund activity in Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS)
Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a 27% gain from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards VLRS over the last 5 quarters, which was largely flat until the latest quarter. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Discovery Capital Management, led by Rob Citrone, holds the biggest position in Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS). Discovery Capital Management has a $74.9 million position in the stock, comprising 1.6% of its 13F portfolio. On Discovery Capital Management’s heels is Paul Reeder and Edward Shapiro of PAR Capital Management, with a $56.3 million position. Other members of the smart money that hold long positions contain Jim Simons’ Renaissance Technologies, Robert B. Gillam’s McKinley Capital Management, and Michael Moriarty’s Teewinot Capital Advisers. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industry-wide interest jumped, some big names have jumped into Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) headfirst. Marshall Wace LLP, led by Paul Marshall and Ian Wace, created the most valuable position in Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS). Marshall Wace LLP had $4 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new VLRS investors: Ken Griffin’s Citadel Investment Group and Matthew Tewksbury’s Stevens Capital Management.
Let’s now take a look at 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 Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Finisar Corporation (NASDAQ:FNSR), KBR, Inc. (NYSE:KBR), and Groupon Inc (NASDAQ:GRPN). All of these stocks’ market caps are similar to VLRS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IRWD | 21 | 482398 | 3 |
| FNSR | 22 | 417786 | 1 |
| KBR | 25 | 471858 | 1 |
| GRPN | 23 | 256987 | 0 |
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $407 million. That figure was $175 million in VLRS’s case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) is even less popular than IRWD. 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.
Disclosure: None
