How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Adient plc (NYSE:ADNT).
Adient plc (NYSE:ADNT) investors should be aware of a decrease in hedge fund interest recently. Adient plc (NYSE:ADNT) was in 35 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 48. There were 39 hedge funds in our database with ADNT holdings at the end of March. Our calculations also showed that ADNT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
At the moment there are tons of metrics stock market investors have at their disposal to appraise publicly traded companies. Some of the most underrated metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best money managers can trounce the market by a superb amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
John Overdeck of Two Sigma Advisors
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Do Hedge Funds Think ADNT Is A Good Stock To Buy Now?
At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position in ADNT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Lyrical Asset Management held the most valuable stake in Adient plc (NYSE:ADNT), which was worth $218.2 million at the end of the second quarter. On the second spot was Redwood Capital Management which amassed $58.1 million worth of shares. 683 Capital Partners, Impala Asset Management, and Renaissance Technologies 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 Clearfield Capital allocated the biggest weight to Adient plc (NYSE:ADNT), around 15.75% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, dishing out 5.82 percent of its 13F equity portfolio to ADNT.
Because Adient plc (NYSE:ADNT) has witnessed bearish sentiment from hedge fund managers, logic holds that there were a few hedgies that decided to sell off their positions entirely heading into Q3. It’s worth mentioning that Bruce Emery’s Greenvale Capital dumped the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $17.7 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $7.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds heading into Q3.
Let’s also examine 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 Balchem Corporation (NASDAQ:BCPC), JFrog Ltd. (NASDAQ:FROG), Radian Group Inc (NYSE:RDN), Signet Jewelers Limited (NYSE:SIG), Premier Inc (NASDAQ:PINC), Quaker Chemical Corp (NYSE:KWR), and Sunnova Energy International Inc. (NYSE:NOVA). This group of stocks’ market caps are similar to ADNT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCPC | 15 | 50095 | 1 |
| FROG | 12 | 251080 | -8 |
| RDN | 30 | 358639 | 0 |
| SIG | 33 | 1209048 | 7 |
| PINC | 17 | 147282 | -2 |
| KWR | 15 | 152150 | -3 |
| NOVA | 25 | 294495 | -1 |
| Average | 21 | 351827 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $662 million in ADNT’s case. Signet Jewelers Limited (NYSE:SIG) is the most popular stock in this table. On the other hand JFrog Ltd. (NASDAQ:FROG) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Adient plc (NYSE:ADNT) is more popular among hedge funds. Our overall hedge fund sentiment score for ADNT is 72.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Unfortunately ADNT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ADNT were disappointed as the stock returned -2.2% since the end of the second quarter (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Adient Plc (NYSE:ADNT)
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Disclosure: None. This article was originally published at Insider Monkey.
