We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Adient plc (NYSE:ADNT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Adient plc (NYSE:ADNT) the right investment to pursue these days? Money managers are becoming hopeful. The number of bullish hedge fund bets inched up by 9 lately. Our calculations also showed that ADNT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ADNT was in 36 hedge funds’ portfolios at the end of December. There were 27 hedge funds in our database with ADNT holdings at the end of the previous quarter.
In the financial world there are plenty of formulas investors have at their disposal to analyze their stock investments. A duo of the most underrated formulas are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the S&P 500 by a solid margin (see the details here).
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the recent hedge fund action regarding Adient plc (NYSE:ADNT).
How are hedge funds trading Adient plc (NYSE:ADNT)?
Heading into the first quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ADNT over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Blue Harbour Group held the most valuable stake in Adient plc (NYSE:ADNT), which was worth $139.2 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $108.6 million worth of shares. Greenlight Capital, Greenhaven Associates, and Newtyn Management 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 Blue Harbour Group allocated the biggest weight to Adient plc (NYSE:ADNT), around 9.54% of its 13F portfolio. Greenlight Capital is also relatively very bullish on the stock, dishing out 3.97 percent of its 13F equity portfolio to ADNT.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Adient plc (NYSE:ADNT) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in Adient plc (NYSE:ADNT). Marshall Wace LLP had $8.9 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also initiated a $5 million position during the quarter. The other funds with brand new ADNT positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Sander Gerber’s Hudson Bay Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Adient plc (NYSE:ADNT) but similarly valued. We will take a look at Cubic Corporation (NYSE:CUB), Vector Group Ltd (NYSE:VGR), Caretrus REIT Inc (NASDAQ:CTRE), and Forward Air Corporation (NASDAQ:FWRD). This group of stocks’ market caps are closest to ADNT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CUB | 19 | 43685 | 2 |
| VGR | 17 | 203826 | -2 |
| CTRE | 13 | 69296 | -3 |
| FWRD | 20 | 137214 | -1 |
| Average | 17.25 | 113505 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $521 million in ADNT’s case. Forward Air Corporation (NASDAQ:FWRD) is the most popular stock in this table. On the other hand Caretrus REIT Inc (NASDAQ:CTRE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Adient plc (NYSE:ADNT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately ADNT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ADNT were disappointed as the stock returned -56% during the three months of 2020 (through April 6th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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.
