The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Copa Holdings, S.A. (NYSE:CPA) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Copa Holdings, S.A. (NYSE:CPA) investors should pay attention to an increase in activity from the world's largest hedge funds of late. Copa Holdings, S.A. (NYSE:CPA) was in 24 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 29. Our calculations also showed that CPA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 56 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we're going to review the recent hedge fund action encompassing Copa Holdings, S.A. (NYSE:CPA).
What have hedge funds been doing with Copa Holdings, S.A. (NYSE:CPA)?
At the end of June, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 60% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in CPA over the last 20 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Copa Holdings, S.A. (NYSE:CPA) was held by Renaissance Technologies, which reported holding $97.4 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $22.3 million position. Other investors bullish on the company included Arrowstreet Capital, Shellback Capital, and Fairpointe Capital. In terms of the portfolio weights assigned to each position Scion Asset Management allocated the biggest weight to Copa Holdings, S.A. (NYSE:CPA), around 2.49% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, designating 1.71 percent of its 13F equity portfolio to CPA.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, assembled the most outsized position in Copa Holdings, S.A. (NYSE:CPA). Shellback Capital had $12.4 million invested in the company at the end of the quarter. Thyra Zerhusen's Fairpointe Capital also initiated a $11.8 million position during the quarter. The other funds with brand new CPA positions are Cliff Asness's AQR Capital Management, Michael Burry's Scion Asset Management, and Noam Gottesman's GLG Partners.
Let's also examine 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 GrafTech International Ltd. (NYSE:EAF), Macy's, Inc. (NYSE:M), GATX Corporation (NYSE:GATX), Investors Bancorp, Inc. (NASDAQ:ISBC), AMN Healthcare Services Inc (NYSE:AMN), Triton International Limited (NYSE:TRTN), and Assured Guaranty Ltd. (NYSE:AGO). This group of stocks' market values match CPA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EAF,24,125189,1 M,36,412417,6 GATX,17,152806,4 ISBC,25,127448,-1 AMN,21,61749,-1 TRTN,14,44903,2 AGO,25,218746,-3 Average,23.1,163323,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $214 million in CPA's case. Macy's, Inc. (NYSE:M) is the most popular stock in this table. On the other hand Triton International Limited (NYSE:TRTN) is the least popular one with only 14 bullish hedge fund positions. Copa Holdings, S.A. (NYSE:CPA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CPA is 57.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on CPA as the stock returned 10.7% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.