Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards The AZEK Company Inc. (NYSE:AZEK) at the end of the third quarter and determine whether the smart money was really smart about this stock.
The AZEK Company Inc. (NYSE:AZEK) was in 38 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AZEK shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 37 hedge funds in our database with AZEK holdings at the end of June. Our calculations also showed that AZEK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind let’s analyze the recent hedge fund action regarding The AZEK Company Inc. (NYSE:AZEK).
Do Hedge Funds Think AZEK Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in AZEK a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The AZEK Company Inc. (NYSE:AZEK) was held by Zimmer Partners, which reported holding $95.9 million worth of stock at the end of September. It was followed by Millennium Management with a $66 million position. Other investors bullish on the company included Balyasny Asset Management, Interval Partners, and Scopus Asset Management. In terms of the portfolio weights assigned to each position Stormborn Capital Management allocated the biggest weight to The AZEK Company Inc. (NYSE:AZEK), around 2.93% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, setting aside 2.44 percent of its 13F equity portfolio to AZEK.
Consequently, specific money managers have jumped into The AZEK Company Inc. (NYSE:AZEK) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most outsized position in The AZEK Company Inc. (NYSE:AZEK). Adage Capital Management had $14.2 million invested in the company at the end of the quarter. Michael Cowley’s Sandbar Asset Management also made a $7.6 million investment in the stock during the quarter. The other funds with brand new AZEK positions are Clint Carlson’s Carlson Capital, Andrew Byington’s Appian Way Asset Management, and Gregg Moskowitz’s Interval Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The AZEK Company Inc. (NYSE:AZEK) but similarly valued. These stocks are Watts Water Technologies Inc (NYSE:WTS), Range Resources Corp. (NYSE:RRC), Clean Harbors Inc (NYSE:CLH), Fate Therapeutics Inc (NASDAQ:FATE), Valvoline Inc. (NYSE:VVV), Harley-Davidson, Inc. (NYSE:HOG), and Southwestern Energy Company (NYSE:SWN). This group of stocks’ market values match AZEK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTS | 16 | 515456 | -2 |
| RRC | 25 | 527031 | 0 |
| CLH | 24 | 391049 | 0 |
| FATE | 36 | 2103428 | -4 |
| VVV | 23 | 641833 | -3 |
| HOG | 33 | 956467 | -4 |
| SWN | 22 | 263603 | -5 |
| Average | 25.6 | 771267 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $771 million. That figure was $427 million in AZEK’s case. Fate Therapeutics Inc (NASDAQ:FATE) is the most popular stock in this table. On the other hand Watts Water Technologies Inc (NYSE:WTS) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks The AZEK Company Inc. (NYSE:AZEK) is more popular among hedge funds. Our overall hedge fund sentiment score for AZEK is 86. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, AZEK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AZEK were disappointed as the stock returned -9.6% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Azek Co Inc. (NYSE:AZEK)
Follow Azek Co Inc. (NYSE:AZEK)
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Disclosure: None. This article was originally published at Insider Monkey.
