Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Axalta Coating Systems Ltd (NYSE:AXTA).
Is Axalta Coating Systems Ltd (NYSE:AXTA) a marvelous investment right now? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions advanced by 8 in recent months. Our calculations also showed that AXTA isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools stock traders put to use to assess stocks. A pair of the less known tools are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the broader indices by a solid amount (see the details here).
Let’s take a glance at the recent hedge fund action regarding Axalta Coating Systems Ltd (NYSE:AXTA).
What have hedge funds been doing with Axalta Coating Systems Ltd (NYSE:AXTA)?
At the end of the first quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the previous quarter. On the other hand, there were a total of 43 hedge funds with a bullish position in AXTA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Axalta Coating Systems Ltd (NYSE:AXTA) was held by Berkshire Hathaway, which reported holding $611.7 million worth of stock at the end of March. It was followed by Diamond Hill Capital with a $263.8 million position. Other investors bullish on the company included Soroban Capital Partners, Deccan Value Advisors, and FPR Partners.
Consequently, some big names were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, created the most outsized position in Axalta Coating Systems Ltd (NYSE:AXTA). Scopus Asset Management had $24.8 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $10.1 million position during the quarter. The other funds with brand new AXTA positions are Javier Velazquez’s Albar Capital, Glenn Russell Dubin’s Highbridge Capital Management, and Glenn Russell Dubin’s Highbridge Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Axalta Coating Systems Ltd (NYSE:AXTA) but similarly valued. We will take a look at Flowserve Corporation (NYSE:FLS), Catalent Inc (NYSE:CTLT), Cree, Inc. (NASDAQ:CREE), and Sabre Corporation (NASDAQ:SABR). This group of stocks’ market values are similar to AXTA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLS | 20 | 235664 | 4 |
| CTLT | 15 | 145810 | -4 |
| CREE | 14 | 88463 | 5 |
| SABR | 21 | 260999 | -3 |
| Average | 17.5 | 182734 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $1963 million in AXTA’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand Cree, Inc. (NASDAQ:CREE) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Axalta Coating Systems Ltd (NYSE:AXTA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately AXTA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AXTA were disappointed as the stock returned -4.2% during the same 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
