Hedge Funds Love These Auto-Manufacturers

At the start of 2015, several analysts and auto industry experts were quite optimistic about the automobile industry with projections that vehicle sales in US  will cross the 17 million mark again after 14 years. However, even though the vehicle sales have been terrific this year that hasn’t translated well for automobile companies and their stocks. The Dow Jones U.S. Automobiles Index (INDEXDJX:DJUSAU) is currently trading down 8.6% year-to-date, compared to the S&P 500, which is down a meager 1.8% year-to-date. Nevertheless, several hedge funds and especially value-focused hedge funds haven’t lost hope and continue to be big backers of automobile stocks. Which is why we at Insider Monkey have compiled a list of five auto stocks that were most popular among hedge funds tracked by us at the end of September.

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

#5 Tata Motors Limited (ADR) (NYSE:TTM)

– Hedge Funds with Long Positions (as of September 30): 22

– Aggregate Value of Hedge Funds’ Holdings (as of September 30): $431 million

India-based auto manufacturer Tata Motors Limited (ADR) (NYSE:TTM) has seen its stock decline gradually since February this year and currently trades down more than 35% year-to-date. Even though sales of Jaguar Land Rover have remained robust this year with a 27% year-over-year in global retail sales in November, the stock of the company hasn’t been able to make a turnaround and trade above the $30 mark convincingly. The number of hedge funds that had long position in the stock decreased by six, while the aggregate value of their holdings slumped by 50% during the third quarter. David Kowitz and Sheldon Kasowitz‘s Indus Capital was one of the hedge funds that initiated a stake in the company during the third quarter; it owns 441,600 shares of the company as of September 30.

#4 Tesla Motors Inc (NASDAQ:TSLA)

– Hedge Funds with Long Positions (as of September 30): 26

– Aggregate Value of Hedge Funds’ Holdings (as of September 30): $1 billion

Tesla Motors Inc (NASDAQ:TSLA) saw a huge rally during the second quarter, but have been on a downward journey ever since and currently trade nearly flat for the year. Last week, Bloomberg Business published a story highlighting a 26 year-old hacker named George Hotz (also known as geohot), who has built a self-driving car by writing just 2,000 lines of AI code in his garage. If Hotz succeeds with launching a final product, it is most likely to launch a new chapter in self-driving technology, which Tesla is currently pursuing. On December 14, Alex Gauna, an analyst at JMP Securities, initiated coverage on Tesla’s stock with a ‘Market Perform’ rating. In the note Mr. Gauna highlighted five investment positives for Tesla, which included “huge addressable market opportunity in automotive and energy storage”. Daniel Benton’s Andor Capital Management continued to own 1 million shares of Tesla Motors at the end of September.

#3 Fiat Chrysler Automobiles NV (NYSE:FCAU)

– Hedge Funds with Long Positions (as of September 30): 34

– Aggregate Value of Hedge Funds’ Holdings (as of September 30): $1.18 billion

Owing largely to the rally it saw during the first quarter of the year, Fiat Chrysler Automobiles NV (NYSE:FCAU) is among the few auto sector stocks that is trading in the green for the year. While shares of Fiat Chrysler Automobiles NV (NYSE:FCAU) dropped by 9% during the third quarter, the number of funds with a stake in the company inched down by one. Though fuel efficiency still remains a concern for the company, it is doing splendidly in regional vehicle sales with growth in Europe outperforming the industry average for 11 months in a row as of November 30. Cliff Asness‘ AQR Capital Management bought an additional 1.6 million shares of Fiat Chrysler Automobiles NV during the third quarter, taking its total holding to almost 6 million shares.

#2 Ford Motor Company (NYSE:F)

– Hedge Funds with Long Positions (as of September 30): 38

– Aggregate Value of Hedge Funds’ Holdings (as of September 30): $907 million

Ford Motor Company (NYSE:F) is an outlier in this list because even though its stock dropped by over 8% during the third quarter, its popularity among hedge funds increased. 2 more funds became bullish on the company and the aggregate value of hedge funds’ holdings in  it jumped $152 million during that period. The company recently announced that it would be making its biggest five-year bet on an auto segment ever by spending $4.5 billion in the development of 13 new electric vehicles over the course of this decade. Robert Polak‘s Anchor Bolt Capital initiated a huge stake in Ford during the third quarter by purchasing over 8 million shares of the company.

#1 General Motors Company (NYSE:GM)

– Hedge Funds with Long Positions (as of September 30): 88

– Aggregate Value of Hedge Funds’ Holdings (as of September 30): $5.1 billion

Even though the number of funds with long positions declined by 16 during the third quarter, the company remained the most popular auto-manufacturer among the funds we track. In the fourth quarter, shares of General Motors Company (NYSE:GM) have recovered most of the losses registered during the July-September period and are currently trading flat for the year. On December 10, the company announced that it has settled the defective ignition switch case against it and will be paying $594 million in damages to the plaintiffs. Legendary investor Warren Buffett‘s Berkshire Hathaway increased its stake in General Motors Company (NYSE:GM) by 22% to 50 million shares during the third quarter.

Disclosure: None