Do Hedge Funds Love Toyota Motor Corporation (ADR) (TM)?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Toyota Motor Corporation (ADR) (NYSE:TM) .

Is Toyota Motor Corporation (ADR) (NYSE:TM) a buy, sell, or hold? Investors who are in the know are altogether getting less bullish. The number of bullish hedge fund positions went down by 1 recently. There were 13 hedge funds in our database with TM holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Novartis AG (ADR) (NYSE:NVS), The Coca-Cola Company (NYSE:KO), and Intel Corporation (NASDAQ:INTC) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, we’re going to take a gander at the latest action regarding Toyota Motor Corporation (ADR) (NYSE:TM).

What have hedge funds been doing with Toyota Motor Corporation (ADR) (NYSE:TM)?

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2016. On the other hand, there were a total of 13 hedge funds with a bullish position in TM at the beginning of this year. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, led by Phill Gross and Robert Atchinson, holds the biggest position in Toyota Motor Corporation (ADR) (NYSE:TM). Adage Capital Management has a $147.5 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, one of the biggest hedge funds in the world, holding a $114.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Ken Fisher’s Fisher Asset Management. We should note that none of these elite funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as Toyota Motor Corporation (ADR) (NYSE:TM) has witnessed declining sentiment from hedge fund managers, logic holds that there were a few fund managers that decided to sell off their full holdings by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management dumped the biggest stake of all the investors watched by Insider Monkey, valued at an estimated $6.6 million in stock. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its call options, about $2.9 million worth.

Let’s now take a look at hedge fund activity in other stocks similar to Toyota Motor Corporation (ADR) (NYSE:TM). We will take a look at Novartis AG (ADR) (NYSE:NVS), The Coca-Cola Company (NYSE:KO), Intel Corporation (NASDAQ:INTC), and Merck & Co., Inc. (NYSE:MRK). This group of stocks’ market values are similar to TM’s market value.

As you can see these stocks had an average of 57.75 hedge funds with bullish positions and the average amount invested in these stocks was $7304 million. That figure was $300 million in TM’s case. Merck & Co., Inc. (NYSE:MRK) is the most popular stock in this table. On the other hand Novartis AG (ADR) (NYSE:NVS) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Toyota Motor Corporation (ADR) (NYSE:TM) is even less popular than NVS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.