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. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Aptiv PLC (NYSE:APTV).
Aptiv PLC (NYSE:APTV) investors should pay attention to an increase in enthusiasm from smart money recently. APTV was in 46 hedge funds’ portfolios at the end of December. There were 29 hedge funds in our database with APTV positions at the end of the previous quarter. Our calculations also showed that APTV 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
David Blood of Generation Investment Management
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 check out the new hedge fund action surrounding Aptiv PLC (NYSE:APTV).
How are hedge funds trading Aptiv PLC (NYSE:APTV)?
At the end of the fourth quarter, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 59% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards APTV over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Generation Investment Management was the largest shareholder of Aptiv PLC (NYSE:APTV), with a stake worth $560.6 million reported as of the end of September. Trailing Generation Investment Management was Impax Asset Management, which amassed a stake valued at $152.9 million. Holocene Advisors, Caxton Associates LP, and Citadel Investment Group 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 Totem Point Management allocated the biggest weight to Aptiv PLC (NYSE:APTV), around 6.59% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, setting aside 4.67 percent of its 13F equity portfolio to APTV.
Consequently, key hedge funds were breaking ground themselves. Caxton Associates LP, managed by Bruce Kovner, initiated the most outsized position in Aptiv PLC (NYSE:APTV). Caxton Associates LP had $34.1 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $29.6 million position during the quarter. The other funds with brand new APTV positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Aptiv PLC (NYSE:APTV) but similarly valued. We will take a look at Telefonica Brasil SA (NYSE:VIV), Hormel Foods Corporation (NYSE:HRL), Realty Income Corporation (NYSE:O), and STMicroelectronics N.V. (NYSE:STM). All of these stocks’ market caps are closest to APTV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VIV | 12 | 97729 | -1 |
| HRL | 23 | 240372 | 1 |
| O | 26 | 394173 | 8 |
| STM | 17 | 146213 | 4 |
| Average | 19.5 | 219622 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $1053 million in APTV’s case. Realty Income Corporation (NYSE:O) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Aptiv PLC (NYSE:APTV) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds 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 and still beat the market by 3.1 percentage points. Unfortunately APTV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on APTV were disappointed as the stock returned -29% during the first two months of 2020 (through March 11th) 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 in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
