Is AutoNation, Inc. (AN) Going to Burn These Hedge Funds?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about AutoNation, Inc. (NYSE:AN).

Is AutoNation, Inc. (NYSE:AN) the right investment to pursue these days? The best stock pickers were buying. The number of bullish hedge fund bets moved up by 5 recently. AutoNation, Inc. (NYSE:AN) was in 29 hedge funds’ portfolios at the end of the third quarter of 2021. 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 Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to review the fresh hedge fund action regarding AutoNation, Inc. (NYSE:AN).

Edward Lampert of ESL Investments

Do Hedge Funds Think AN Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AN over the last 25 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in AutoNation, Inc. (NYSE:AN), worth close to $157.6 million, corresponding to 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Edward Lampert of ESL Investments, with a $107.3 million position; the fund has 69.3% of its 13F portfolio invested in the stock. Other peers that are bullish consist of Cliff Asness’s AQR Capital Management, Mario Gabelli’s GAMCO Investors and Murray Stahl’s Horizon Asset Management. In terms of the portfolio weights assigned to each position ESL Investments allocated the biggest weight to AutoNation, Inc. (NYSE:AN), around 69.3% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, dishing out 1.11 percent of its 13F equity portfolio to AN.

As one would reasonably expect, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the biggest position in AutoNation, Inc. (NYSE:AN). Point72 Asset Management had $14.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $11.1 million investment in the stock during the quarter. The other funds with brand new AN positions are Anand Parekh’s Alyeska Investment Group, Dmitry Balyasny’s Balyasny Asset Management, and Stephen J. Errico’s Locust Wood Capital Advisers.

Let’s also examine hedge fund activity in other stocks similar to AutoNation, Inc. (NYSE:AN). We will take a look at Store Capital Corporation (NYSE:STOR), Cabot Oil & Gas Corporation (NYSE:COG), Braskem SA (NYSE:BAK), Smartsheet Inc. (NYSE:SMAR), Sensata Technologies Holding plc (NYSE:ST), Alleghany Corporation (NYSE:Y), and Western Midstream Partners, LP (NYSE:WES). This group of stocks’ market values match AN’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $689 million. That figure was $681 million in AN’s case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 8 bullish hedge fund positions. AutoNation, Inc. (NYSE:AN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AN is 59.2. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately AN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AN were disappointed as the stock returned 1.7% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.