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.

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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.

Fiat Chrysler and Alphabet Partnership Could Lead to Big Things

Hedge fund interest in Fiat Chrysler Automobiles NV (NYSE:FCAU) was flat over the course of the first quarter, as the number of long positions remained unchanged at 28, or 3.7% of the fund’s we follow. Harris Associates’ stake in the car maker was reduced by 22% during the quarter and currently amounts to 34.2 million shares worth $276 million, while Cliff Asness also chose to reduce his fund’s exposure to Fiat Chrysler Automobiles NV (NYSE:FCAU), having trimmed AQR Capital’s stake by 1% to 10.8 million shares valued at $87.4 million. Fiat Chrysler is the first major car maker to announce a self-driving vehicle partnership with Alphabet, as opposed to most of their competitors, who have chosen to develop their own software. The two companies have agreed to work on the redesign of 100 Chrysler minivans to include Alphabet’s software and sensors, with the first cars expected to hit the road by the end of the year. Since Alphabet has said that it does not plan to build its own cars, the deal could lead to the two companies designing a new vehicle from scratch.

Bullish Sentiment Towards Truck Maker

The popularity of PACCAR Inc (NASDAQ:PCAR) among elite hedge funds inched up during the first three months of 2016, with the number of long positions reported as of the end of the first quarter reaching 26, up from 24 reported as of the end of December. Anand Parekh‘s fund, Alyeska Investment Group, established a new position in PACCAR Inc (NASDAQ:PCAR) during the first quarter, having bought 533,310 shares worth $29.1 million at the end of March. The company had a disappointing first quarter, as its main financial indicators were below expectations. PACCAR Inc (NASDAQ:PCAR) posted a loss of $594.6 million, which translated into a profit of $0.99 per share when adjusted for non-recurring costs, on $4.01 billion in revenue. Analysts, in turn, had projected $0.95 per share in earnings on the back of $4.07 billion in revenue. So far this year, the stock has been trending positively, having ended yesterday’s trading session up by 16% for the year.

Tesla Entering Proving Grounds Stage

The popularity of Tesla Motors Inc (NASDAQ:TSLA) surged during the first quarter, as the number of hedge funds invested in the stock reached 39, up from 29 a quarter prior. Daniel Benton‘s Andor Capital Management is heavily invested in Tesla Motors Inc (NASDAQ:TSLA), but chose to reduce its holding by 50% during the quarter. According to its latest 13F filing, the fund holds 500,000 Tesla shares valued at $114 million, a position that accounts for roughly half of its equity portfolio. The maker of electric sports car has recently expanded into other segments, as it introduced the Model X, a full-sized crossover, and has started production of the Model 3, a compact sedan. Priced at $35,000, the Model 3 appears poised to be a major success, as the number of pre-orders reached 400,000 within the first two weeks. Tesla Motors Inc (NASDAQ:TSLA), which has only produced roughly 100,000 cars in total thus far, will now need to prove that it can scale its production to meet the soaring demand, and do so profitably. The first Model 3 units are expected to be delivered at the end of 2017, while the most recent orders will not be delivered until 2020 according to company officials.

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