We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Fiat Chrysler Automobiles NV (NYSE:FCAU) and determine whether hedge funds skillfully traded this stock.
Fiat Chrysler Automobiles NV (NYSE:FCAU) shareholders have witnessed a decrease in hedge fund sentiment recently. Fiat Chrysler Automobiles NV (NYSE:FCAU) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistics is 36. Our calculations also showed that FCAU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are seen as underperforming, outdated investment tools of the past. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the bigwigs of this club, approximately 850 funds. It is estimated that this group of investors oversee the majority of all hedge funds’ total capital, and by watching their top picks, Insider Monkey has figured out various investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s take a peek at the new hedge fund action regarding Fiat Chrysler Automobiles NV (NYSE:FCAU).
Hedge fund activity in Fiat Chrysler Automobiles NV (NYSE:FCAU)
At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in FCAU a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in Fiat Chrysler Automobiles NV (NYSE:FCAU), which was worth $193.5 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $76.6 million worth of shares. Balyasny Asset Management, Ancient Art (Teton Capital), and LMR Partners 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 Aquamarine Capital Management allocated the biggest weight to Fiat Chrysler Automobiles NV (NYSE:FCAU), around 5.56% of its 13F portfolio. Ancient Art (Teton Capital) is also relatively very bullish on the stock, dishing out 3.36 percent of its 13F equity portfolio to FCAU.
Because Fiat Chrysler Automobiles NV (NYSE:FCAU) has faced a decline in interest from the aggregate hedge fund industry, we can see that there were a few funds that slashed their entire stakes last quarter. Interestingly, Renaissance Technologies dumped the biggest investment of all the hedgies followed by Insider Monkey, totaling about $18.8 million in stock. Mohnish Pabrai’s fund, Mohnish Pabrai, also cut its stock, about $4.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Fiat Chrysler Automobiles NV (NYSE:FCAU) but similarly valued. These stocks are DTE Energy Company (NYSE:DTE), New Oriental Education & Technology Group Inc. (NYSE:EDU), Canadian Natural Resources Limited (NYSE:CNQ), AMETEK, Inc. (NYSE:AME), AmerisourceBergen Corporation (NYSE:ABC), Carvana Co. (NYSE:CVNA), and Alexandria Real Estate Equities Inc (NYSE:ARE). This group of stocks’ market values are similar to FCAU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DTE | 24 | 384220 | -5 |
| EDU | 39 | 1378683 | -3 |
| CNQ | 28 | 556305 | 2 |
| AME | 40 | 952884 | 7 |
| ABC | 40 | 646674 | -1 |
| CVNA | 57 | 3587877 | 5 |
| ARE | 18 | 53382 | -11 |
| Average | 35.1 | 1080004 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.1 hedge funds with bullish positions and the average amount invested in these stocks was $1080 million. That figure was $366 million in FCAU’s case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 18 bullish hedge fund positions. Fiat Chrysler Automobiles NV (NYSE:FCAU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FCAU is 16.7. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on FCAU as the stock returned 19.3% in the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
