Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Ford Motor Company (NYSE:F) makes for a good investment right now.
Ford Motor Company (NYSE:F) investors should pay attention to a decrease in hedge fund sentiment in recent months. Our calculations also showed that F 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.
In today’s marketplace there are many indicators stock market investors use to appraise their stock investments. A pair of the less known indicators are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the elite money managers can beat the broader indices by a very impressive margin (see the details here).
Richard S. Pzena of Pzena 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. With all of this in mind we’re going to analyze the latest hedge fund action encompassing Ford Motor Company (NYSE:F).
How are hedge funds trading Ford Motor Company (NYSE:F)?
At the end of the fourth quarter, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in F a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Ford Motor Company (NYSE:F) was held by Greenhaven Associates, which reported holding $318 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $293.4 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to Ford Motor Company (NYSE:F), around 7.09% of its 13F portfolio. Ellington is also relatively very bullish on the stock, setting aside 5.03 percent of its 13F equity portfolio to F.
Since Ford Motor Company (NYSE:F) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedgies who sold off their positions entirely by the end of the third quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $7.8 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners was right behind this move, as the fund sold off about $1.2 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ford Motor Company (NYSE:F) but similarly valued. These stocks are Roper Technologies, Inc. (NYSE:ROP), Occidental Petroleum Corporation (NYSE:OXY), The Allstate Corporation (NYSE:ALL), and Constellation Brands, Inc. (NYSE:STZ). All of these stocks’ market caps are closest to F’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROP | 40 | 1248081 | -1 |
| OXY | 44 | 2305548 | -18 |
| ALL | 37 | 1712738 | -11 |
| STZ | 52 | 1980100 | 6 |
| Average | 43.25 | 1811617 | -6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.25 hedge funds with bullish positions and the average amount invested in these stocks was $1812 million. That figure was $1104 million in F’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand The Allstate Corporation (NYSE:ALL) is the least popular one with only 37 bullish hedge fund positions. Compared to these stocks Ford Motor Company (NYSE:F) is even less popular than ALL. Hedge funds dodged a bullet by taking a bearish stance towards F. 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 F wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); F investors were disappointed as the stock returned -35.5% 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.
