We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Autohome Inc (NYSE:ATHM).
Is ATHM a good stock to buy now? Autohome Inc (NYSE:ATHM) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. ATHM has experienced a decrease in support from the world’s most elite money managers recently. There were 24 hedge funds in our database with ATHM holdings at the end of June. Our calculations also showed that ATHM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are dozens of formulas shareholders have at their disposal to value stocks. A pair of the most under-the-radar formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best investment managers can outpace the market by a significant amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now let’s go over the new hedge fund action surrounding Autohome Inc (NYSE:ATHM).
Do Hedge Funds Think ATHM Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in ATHM a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Orbis Investment Management, managed by William B. Gray, holds the largest position in Autohome Inc (NYSE:ATHM). Orbis Investment Management has a $629.3 million position in the stock, comprising 5% of its 13F portfolio. On Orbis Investment Management’s heels is OZ Management, managed by Daniel S. Och, which holds a $136.5 million position; 0.9% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism encompass Renaissance Technologies, D. E. Shaw’s D E Shaw and Ray Dalio’s Bridgewater Associates. In terms of the portfolio weights assigned to each position Orbis Investment Management allocated the biggest weight to Autohome Inc (NYSE:ATHM), around 4.95% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, dishing out 1.71 percent of its 13F equity portfolio to ATHM.
Because Autohome Inc (NYSE:ATHM) has experienced falling interest from the smart money, logic holds that there were a few hedgies that slashed their full holdings in the third quarter. Intriguingly, James Chen’s Ovata Capital Management cut the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $10.2 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $8.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 7 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Autohome Inc (NYSE:ATHM). These stocks are Natura &Co Holding S.A. (NYSE:NTCO), The Liberty SiriusXM Group (NASDAQ:LSXMA), Cable One Inc (NYSE:CABO), Hasbro, Inc. (NASDAQ:HAS), W.P. Carey Inc. (NYSE:WPC), Cognex Corporation (NASDAQ:CGNX), and NovoCure Limited (NASDAQ:NVCR). This group of stocks’ market caps resemble ATHM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTCO | 4 | 98196 | -1 |
| LSXMA | 42 | 1294451 | -4 |
| CABO | 23 | 686716 | -1 |
| HAS | 31 | 372962 | 8 |
| WPC | 23 | 140774 | 0 |
| CGNX | 28 | 213078 | 2 |
| NVCR | 22 | 544665 | -5 |
| Average | 24.7 | 478692 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $479 million. That figure was $909 million in ATHM’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 4 bullish hedge fund positions. Autohome Inc (NYSE:ATHM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ATHM is 36.4. 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately ATHM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ATHM investors were disappointed as the stock returned 4.4% since the end of September (through 12/14) 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 in 2020.
Follow Autohome Inc. (NYSE:ATHM)
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Disclosure: None. This article was originally published at Insider Monkey.
