Here’s What You Should Know About Toyota Motor Corporation (ADR) (TM)

The fallout from the Takata airbag scandal has struck again, with Toyota Motor Corporation (ADR) (NYSE:TM) now calling back around another 1.6 million additional vehicles in the United States. Earlier in the month, Takata declared that 35 to 40 million of its U.S. airbag inflators were defective, up more than double from its previous declaration. Takata’s inflators use ammonium nitrate, which have been shown to be unstable if exposed to humidity and heat. The instability can cause ruptures that might send metal parts flying into the cabin. At least 11 people have died and 100 people have been injured partly due to the defect. The Takata scandal has caused several automobile makers to take considerable write-downs in their most recent round of earnings releases and has tarnished Japan’s sterling quality reputation. Toyota Motor Corp (ADR) (NYSE:TM) will replace the airbag inflator at no additional cost to the consumer. With this in mind, let’s take a closer look at how hedge funds and other institutional investors have been trading Toyota Motor Corp.

Toyota Motor Corporation (ADR) (NYSE:TM) has seen a decrease in support from the world’s most elite money managers of late. TM was in 12 hedge funds’ portfolios at the end of the first quarter of 2016, down from 13 hedge funds in our database with TM holdings at the end of the previous quarter. At the end of this article we will also compare TM to other stocks including The Walt Disney Company (NYSE:DIS), Intel Corporation (NASDAQ:INTC), and Philip Morris International Inc. (NYSE:PM) to get a better sense of its popularity.

At the moment there are dozens of methods market participants can use to grade stocks. A couple of the less utilized methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top investment managers can outpace their index-focused peers by a healthy amount (see the details here).

Now, let’s take a glance at the key action regarding Toyota Motor Corporation (ADR) (NYSE:TM).

Heading into the second quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the fourth quarter of 2015. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Toyota Motor Corporation (ADR) (NYSE:TM). Adage Capital Management has a $140.4 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, managed by Jim Simons, which holds a $75 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Ken Fisher’s Fisher Asset Management.

Seeing as Toyota Motor Corporation (ADR) (NYSE:TM) has witnessed declining sentiment from the smart money, it’s easy to see that there is a sect of money managers who sold off their entire stakes heading into Q2. It’s worth mentioning that Thomas Bailard’s Bailard Inc said goodbye to the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $4.2 million in stock, and John W. Moon’s Moon Capital was right behind this move, as the fund said goodbye to about $2.2 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Toyota Motor Corporation (ADR) (NYSE:TM) but similarly valued. We will take a look at The Walt Disney Company (NYSE:DIS), Intel Corporation (NASDAQ:INTC), Philip Morris International Inc. (NYSE:PM), and Comcast Corporation (NASDAQ:CMCSA). All of these stocks’ market caps are similar to TM’s market cap.

As you can see these stocks had an average of 60.25 hedge funds with bullish positions and the average amount invested in these stocks was $5064 million. That figure was $269 million in TM’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand Philip Morris International Inc. (NYSE:PM) is the least popular one with only 48 bullish hedge fund positions. Compared to these stocks Toyota Motor Corporation (ADR) (NYSE:TM) is even less popular than Philip Morris International. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None