With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Honda Motor Co Ltd (NYSE:HMC).
Honda Motor Co Ltd (NYSE:HMC) was in 13 hedge funds’ portfolios at the end of December. HMC investors should pay attention to an increase in activity from the world’s largest hedge funds recently. There were 11 hedge funds in our database with HMC holdings at the end of the previous quarter. Our calculations also showed that HMC isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to check out the fresh hedge fund action regarding Honda Motor Co Ltd (NYSE:HMC).
How are hedge funds trading Honda Motor Co Ltd (NYSE:HMC)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in HMC a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the most valuable position in Honda Motor Co Ltd (NYSE:HMC), worth close to $34.1 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $28.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions encompass D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in Honda Motor Co Ltd (NYSE:HMC). Marshall Wace LLP had $8.6 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also made a $3.5 million investment in the stock during the quarter. The following funds were also among the new HMC investors: Frederick DiSanto’s Ancora Advisors and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks similar to Honda Motor Co Ltd (NYSE:HMC). We will take a look at General Dynamics Corporation (NYSE:GD), The Bank of New York Mellon Corporation (NYSE:BK), Occidental Petroleum Corporation (NYSE:OXY), and UBS Group AG (NYSE:UBS). This group of stocks’ market caps match HMC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GD | 37 | 6273648 | 2 |
| BK | 25 | 5029389 | -14 |
| OXY | 32 | 1051021 | -3 |
| UBS | 11 | 739518 | -3 |
| Average | 26.25 | 3273394 | -4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $3273 million. That figure was $106 million in HMC’s case. General Dynamics Corporation (NYSE:GD) is the most popular stock in this table. On the other hand UBS Group AG (NYSE:UBS) is the least popular one with only 11 bullish hedge fund positions. Honda Motor Co Ltd (NYSE:HMC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately HMC wasn’t in this group. Hedge funds that bet on HMC were disappointed as the stock returned 3.8% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
