Are Hedge Funds Losing Interest in Big Auto-Makers?

Although the automotive industry had been dormant for quite a while, recent trends towards efficiency and safety have prompted a wave of innovation that has intensified the competition among top car makers. Global leaders like Toyota and General Motors Company (NYSE:GM) have been developing electric cars for a long time now, but a recent jolt by software companies like Alphabet Inc (NASDAQ:GOOGL) has prompted a rush for the development of self-driving vehicles. At the same time, the emissions scandals involving several major automakers has put pressure on automotive stocks, with companies facing large fines and litigation costs. The result has been a tendency to limit exposure to major automotive companies among the elite hedge funds that Insider Monkey tracks, as witnessed when analyzing the latest wave of 13F filings.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).

GM Eager To Have A Head Start

Hedge fund interest in General Motors Company (NYSE:GM) dropped significantly during the first quarter. Only 67 of the funds followed by Insider Monkey reported being long the stock at the end of March, down from 84 a quarter prior. Harris Associates, run by Natixis Global Asset Management, still holds the largest stake in General Motors among elite hedge funds. According to its latest 13F filing, Harris Associates’ ownership amounts to 78.5 million shares worth $2.47 billion. Warren Buffett‘s Berkshire Hathaway is also heavily invested in GM, holding 50 million shares valued at $1.57 billion. Having regained its footing following its 2008 bankruptcy, General Motors Company (NYSE:GM) is now fighting tooth and nail to establish itself as one of the pioneers of the autonomous vehicle market. The company recently acquired Cruise Automation, a developer of autonomous vehicle technology, for more than $1 billion and the first tests are already under way, with several Chevrolet Bolts equipped with Cruise Automation’s kits already spotted in San Francisco. GM is also partnering with ride-hailing service Lyft to look into the possibility of introducing self-driving taxis. Tests are expected to start within a year.

Self-Driving Laggard

33 of the funds tracked by Insider Monkey had Ford Motor Company (NYSE:F) in their portfolios at the end of March, down from 39 a quarter earlier. Their combined holdings are not exactly robust either, amounting to just 1% of the company’s common stock. Contrary to his peers, David Harding chose to boost his fund’s investment in Ford Motor Company (NYSE:F), increasing it by 32% during the first quarter. Winton Capital Management holds 5.36 million Ford shares worth $72.3 million as of March 31. Ford Motor Company (NYSE:F) is lagging behind GM when it comes to self-driving vehicles, as the company is still evaluating potential partnerships and has not yet finalized its strategy for the industry. At a recent conference in Detroit, Ford Chairman Bill Ford said that we are bound to “see a lot of partnerships, a lot more than you used to see in the auto industry”, adding that more information on Ford’s approach will become available in the near future.

Turn the page to find out whether there are still some car makers investors are optimistic about.