It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Aptiv PLC (NYSE:APTV) and compare its performance against hedge funds’ favorite stocks.
Is Aptiv PLC (NYSE:APTV) undervalued? Investors who are in the know are getting more optimistic. The number of bullish hedge fund bets went up by 1 recently. Our calculations also showed that APTV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). APTV was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. There were 26 hedge funds in our database with APTV positions at the end of the previous quarter.
According to most investors, hedge funds are perceived as slow, old investment tools of years past. While there are greater than 8000 funds trading today, Our experts look at the elite of this club, approximately 750 funds. These hedge fund managers have their hands on most of the hedge fund industry’s total capital, and by shadowing their matchless equity investments, Insider Monkey has revealed several investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
David Blood of Generation Investment Management
We leave no stone unturned when looking for the next great investment idea. For example 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. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to take a peek at the key hedge fund action encompassing Aptiv PLC (NYSE:APTV).
What have hedge funds been doing with Aptiv PLC (NYSE:APTV)?
At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in APTV over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Generation Investment Management was the largest shareholder of Aptiv PLC (NYSE:APTV), with a stake worth $495.3 million reported as of the end of September. Trailing Generation Investment Management was Impax Asset Management, which amassed a stake valued at $128 million. Senator Investment Group, Holocene Advisors, and Black-and-White Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Totem Point Management allocated the biggest weight to Aptiv PLC (NYSE:APTV), around 6.24% of its 13F portfolio. Black-and-White Capital is also relatively very bullish on the stock, designating 3.67 percent of its 13F equity portfolio to APTV.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, initiated the most valuable position in Aptiv PLC (NYSE:APTV). Polar Capital had $10.2 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $3.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Michael Gelband’s ExodusPoint Capital, and Paul Marshall and Ian Wace’s Marshall Wace.
Let’s now take a look at hedge fund activity in other stocks similar to Aptiv PLC (NYSE:APTV). We will take a look at Verisign, Inc. (NASDAQ:VRSN), Corning Incorporated (NYSE:GLW), Telefonica Brasil SA (NYSE:VIV), and Interactive Brokers Group, Inc. (NASDAQ:IBKR). This group of stocks’ market values resemble APTV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRSN | 30 | 5568484 | -2 |
| GLW | 27 | 203363 | 1 |
| VIV | 13 | 92351 | 1 |
| IBKR | 24 | 1030551 | 0 |
| Average | 23.5 | 1723687 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $1724 million. That figure was $888 million in APTV’s case. Verisign, Inc. (NASDAQ:VRSN) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 13 bullish hedge fund positions. Aptiv PLC (NYSE:APTV) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on APTV as the stock returned 56.8% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
