We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Fiat Chrysler Automobiles NV (NYSE:FCAU) based on that data.
Fiat Chrysler Automobiles NV (NYSE:FCAU) was in 23 hedge funds’ portfolios at the end of December. FCAU has seen a decrease in activity from the world’s largest hedge funds lately. There were 28 hedge funds in our database with FCAU positions at the end of the previous quarter. Our calculations also showed that FCAU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action encompassing Fiat Chrysler Automobiles NV (NYSE:FCAU).
Hedge fund activity in Fiat Chrysler Automobiles NV (NYSE:FCAU)
Heading into the first quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the third quarter of 2019. On the other hand, there were a total of 34 hedge funds with a bullish position in FCAU a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Fiat Chrysler Automobiles NV (NYSE:FCAU) was held by Arrowstreet Capital, which reported holding $322.7 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $210.8 million position. Other investors bullish on the company included Mohnish Pabrai, Renaissance Technologies, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Mohnish Pabrai allocated the biggest weight to Fiat Chrysler Automobiles NV (NYSE:FCAU), around 44.69% of its 13F portfolio. Aquamarine Capital Management is also relatively very bullish on the stock, earmarking 13.62 percent of its 13F equity portfolio to FCAU.
Due to the fact that Fiat Chrysler Automobiles NV (NYSE:FCAU) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Chase Coleman’s Tiger Global Management LLC said goodbye to the largest investment of the 750 funds followed by Insider Monkey, valued at an estimated $973.5 million in stock, and Jay Petschek and Steven Major’s Corsair Capital Management was right behind this move, as the fund dumped about $1.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 5 funds by the end of the third quarter.
Let’s now take a look at 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 Match Group, Inc. (NASDAQ:MTCH), Twenty-First Century Fox Inc (NASDAQ:FOXA), Snap Inc. (NYSE:SNAP), and Liberty Broadband Corp (NASDAQ:LBRDK). This group of 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 |
|---|---|---|---|
| MTCH | 32 | 1073084 | -12 |
| FOXA | 37 | 2451723 | -14 |
| SNAP | 66 | 2388937 | 12 |
| LBRDK | 46 | 4094159 | 2 |
| Average | 45.25 | 2501976 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.25 hedge funds with bullish positions and the average amount invested in these stocks was $2502 million. That figure was $971 million in FCAU’s case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand Match Group, Inc. (NASDAQ:MTCH) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks Fiat Chrysler Automobiles NV (NYSE:FCAU) is even less popular than MTCH. Hedge funds dodged a bullet by taking a bearish stance towards FCAU. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately FCAU wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FCAU investors were disappointed as the stock returned -27.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
