Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim to deliver attractive risk-adjusted returns rather than following the ups-and-downs of equity markets, hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Fiat Chrysler Automobiles NV (NYSE:FCAU).
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Is Fiat Chrysler Automobiles NV worth your attention right now? We know that Guy Spier and Mohnish Pabria have been very bullish for a very long time, however, in aggregate smart money is getting less bullish at the margin. The number of long hedge fund positions was cut by one lately. FCAU was in 34 hedge funds’ portfolios at the end of the third quarter of 2015. There were 35 hedge funds in our database with FCAU positions at the end of the previous quarter. At the end of this article we will also compare FCAU to other stocks including Chipotle Mexican Grill, Inc. (NYSE:CMG), TransCanada Corporation (USA) (NYSE:TRP), and AutoZone, Inc. (NYSE:AZO) to get a better sense of its popularity.
If you’d ask most traders, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are more than 8,000 funds trading today, experts at hedge fund tracking site Insider Monkey hone in on the elite of this club, about 700 funds. These investment experts command the lion’s share of all hedge funds’ total asset base, and by following their matchless picks, Insider Monkey has figured out numerous investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per annum for a decade in its backtests.
Keeping this in mind, let’s take a look at the key action regarding Fiat Chrysler Automobiles NV (NYSE:FCAU).
What does the smart money think about Fiat Chrysler Automobiles NV (NYSE:FCAU)?
Heading into Q4, a total of 34 of the hedge funds tracked by Insider Monkey were long in this stock, a 3% slide from the previous quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly.
When looking at the hedgies followed by Insider Monkey, OZ Management, managed by Daniel S. Och, holds the number one position in Fiat Chrysler Automobiles NV (NYSE:FCAU). OZ Management has a $196 million position in the stock, comprising 0.7% of its 13F portfolio. Commanding the number two spot is Mohnish Pabrai, with a $182.2 million position; a hefty 48.3% of his 13F portfolio is allocated to the company. Remaining hedgies with similar optimism encompass Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, David E. Shaw’s D E Shaw, and Cliff Asness’ AQR Capital Management.
Due to the fact that Fiat Chrysler Automobiles NV (NYSE:FCAU) has experienced declining sentiment from the smart money, we can see that there is a sect of fund managers who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Kevin D. Eng’s Columbus Hill Capital Management said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $19.1 million in call options. Och’s fund, OZ Management, also sold off its call options, about $17.1 million worth.
Let’s go over hedge fund activity in other stocks similar to Fiat Chrysler Automobiles NV (NYSE:FCAU). These stocks are Chipotle Mexican Grill, Inc. (NYSE:CMG), TransCanada Corporation (USA) (NYSE:TRP), AutoZone, Inc. (NYSE:AZO), and Canadian Pacific Railway Limited (USA) (NYSE:CP). All of these stocks’ market caps are closest to FCAU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMG | 28 | 1099623 | -8 |
| TRP | 14 | 398464 | -2 |
| AZO | 39 | 1220796 | 3 |
| CP | 39 | 3975017 | -12 |
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1.67 billion. That figure was $1.18 billion in Fiat Chrysler. AutoZone, Inc. (NYSE:AZO) is the most popular stock in this table. On the other hand TransCanada Corporation (USA) (NYSE:TRP) is the least popular one with only 14 bullish hedge fund positions. Fiat Chrysler Automobiles NV (NYSE:FCAU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are pouring a lot of money into. In this regard AutoZone might be a better candidate to consider a long position in.
