Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards AutoNation, Inc. (NYSE:AN) to find out whether there were any major changes in hedge funds’ views.
Is AN stock a buy? AutoNation, Inc. (NYSE:AN) investors should pay attention to a decrease in hedge fund interest recently. AutoNation, Inc. (NYSE:AN) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 36. Our calculations also showed that AN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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Edward Lampert of ESL Investments
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a gander at the recent hedge fund action surrounding AutoNation, Inc. (NYSE:AN).
Do Hedge Funds Think AN Is A Good Stock To Buy Now?
At the end of December, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AN over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, ESL Investments held the most valuable stake in AutoNation, Inc. (NYSE:AN), which was worth $155.9 million at the end of the fourth quarter. On the second spot was Eminence Capital which amassed $126 million worth of shares. AQR Capital Management, Arrowstreet Capital, and GAMCO Investors 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 ESL Investments allocated the biggest weight to AutoNation, Inc. (NYSE:AN), around 61.23% of its 13F portfolio. Steel Canyon Capital is also relatively very bullish on the stock, setting aside 3.54 percent of its 13F equity portfolio to AN.
Judging by the fact that AutoNation, Inc. (NYSE:AN) has experienced a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds who sold off their full holdings in the fourth quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital said goodbye to the biggest stake of the 750 funds monitored by Insider Monkey, totaling about $1.4 million in stock. Ray Dalio’s fund, Bridgewater Associates, also cut its stock, about $1.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 10 funds in the fourth quarter.
Let’s now review hedge fund activity in other stocks similar to AutoNation, Inc. (NYSE:AN). We will take a look at Vertiv Holdings Co (NYSE:VRT), Credit Acceptance Corp. (NASDAQ:CACC), Perrigo Co Plc (NASDAQ:PRGO), TopBuild Corp (NYSE:BLD), Mattel, Inc. (NASDAQ:MAT), Devon Energy Corporation (NYSE:DVN), and Western Alliance Bancorporation (NYSE:WAL). This group of stocks’ market values resemble AN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRT | 50 | 1345343 | -1 |
| CACC | 29 | 771364 | 0 |
| PRGO | 31 | 363463 | 2 |
| BLD | 19 | 42185 | -2 |
| MAT | 25 | 858930 | -1 |
| DVN | 45 | 709230 | 1 |
| WAL | 22 | 112754 | -6 |
| Average | 31.6 | 600467 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $600 million. That figure was $587 million in AN’s case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand TopBuild Corp (NYSE:BLD) is the least popular one with only 19 bullish hedge fund positions. AutoNation, Inc. (NYSE:AN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AN is 20.6. 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 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on AN as the stock returned 39.8% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.
Follow Autonation Inc. (NYSE:AN)
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Disclosure: None. This article was originally published at Insider Monkey.
