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 31st, so let’s proceed with the discussion of the hedge fund sentiment on Advance Auto Parts, Inc. (NYSE:AAP).
Is AAP stock a buy? The best stock pickers were in a bearish mood. The number of long hedge fund bets fell by 6 recently. Advance Auto Parts, Inc. (NYSE:AAP) was in 36 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. Our calculations also showed that AAP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Daniel Sundheim of D1 Capital Partners
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Do Hedge Funds Think AAP Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the third quarter of 2020. By comparison, 42 hedge funds held shares or bullish call options in AAP a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Melvin Capital Management held the most valuable stake in Advance Auto Parts, Inc. (NYSE:AAP), which was worth $435.4 million at the end of the fourth quarter. On the second spot was D1 Capital Partners which amassed $146.2 million worth of shares. Millennium Management, Citadel Investment Group, and Adage Capital Management 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 East Side Capital (RR Partners) allocated the biggest weight to Advance Auto Parts, Inc. (NYSE:AAP), around 8.56% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, earmarking 3.73 percent of its 13F equity portfolio to AAP.
Due to the fact that Advance Auto Parts, Inc. (NYSE:AAP) has faced bearish sentiment from the smart money, it’s easy to see that there were a few funds that decided to sell off their entire stakes last quarter. It’s worth mentioning that Louis Bacon’s Moore Global Investments dumped the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $18.3 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dropped its stock, about $16.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Advance Auto Parts, Inc. (NYSE:AAP). These stocks are Zynga Inc (NASDAQ:ZNGA), News Corp (NASDAQ:NWSA), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Cna Financial Corporation (NYSE:CNA), News Corp (NASDAQ:NWS), Lennox International Inc. (NYSE:LII), and Repligen Corporation (NASDAQ:RGEN). This group of stocks’ market values are closest to AAP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZNGA | 52 | 1002909 | 4 |
| NWSA | 32 | 703034 | 1 |
| TEVA | 26 | 916076 | -7 |
| CNA | 16 | 60793 | -1 |
| NWS | 11 | 65562 | -3 |
| LII | 27 | 353035 | -7 |
| RGEN | 37 | 1330745 | 2 |
| Average | 28.7 | 633165 | -1.6 |
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As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $633 million. That figure was $1353 million in AAP’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 11 bullish hedge fund positions. Advance Auto Parts, Inc. (NYSE:AAP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AAP is 46.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on AAP as the stock returned 18.2% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
