Hedge Funds Are Buying Autoliv Inc. (ALV)

Like everyone else, successful investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show successful investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what successful funds and billionaire investors think before doing extensive research on a stock. In this article, we take a closer look at Autoliv Inc. (NYSE:ALV) from the perspective of those successful funds.

Is Autoliv Inc. (NYSE:ALV) going to take off soon? Hedge funds are actually turning bullish. The number of long hedge fund bets that are revealed through the 13F filings increased by 3 in recent months. There were 13 hedge funds in our database with ALV positions at the end of the third 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 Ally Financial Inc (NYSE:ALLY), Harley-Davidson, Inc. (NYSE:HOG), and Xylem Inc (NYSE:XYL) 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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What does the smart money think about Autoliv Inc. (NYSE:ALV)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a gain of 30% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ALV over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Cliff Asness’ AQR Capital Management has the number one position in Autoliv Inc. (NYSE:ALV), worth close to $13.1 million. Sitting at the No. 2 spot is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital holding a $10.1 million position. Some other members of the smart money with similar optimism include Ed Beddow and William Tichy’s Beddow Capital Management, and George Hall’s Clinton Group. We should note that none of these hedge 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.

As aggregate interest increased, some big names have jumped into Autoliv Inc. (NYSE:ALV) headfirst. Ed Beddow and William Tichy of Beddow Capital Management established the most outsized position in Autoliv Inc. (NYSE:ALV). Beddow Capital Management had $8.3 million invested in the company at the end of the quarter. Renaissance Technologies, one of the largest hedge funds in the world, also initiated an $8.2 million position during the quarter. The following funds were also among the new ALV investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Steve Cohen’s Point72 Asset Management, and Noam Gottesman’s GLG Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Autoliv Inc. (NYSE:ALV) but similarly valued. We will take a look at Ally Financial Inc (NYSE:ALLY), Harley-Davidson, Inc. (NYSE:HOG), Xylem Inc (NYSE:XYL), and CBRE Group Inc (NYSE:CBG). All of these stocks’ market caps are closest to ALV’s market cap.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1.29 billion. That figure was $60 million in ALV’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Autoliv Inc. (NYSE:ALV) is even less popular than XYL. 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.

Disclosure: None