Is CAR Stock A Buy or Sell?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Avis Budget Group Inc. (NASDAQ:CAR).

Is CAR stock a buy? Avis Budget Group Inc. (NASDAQ:CAR) has seen a decrease in activity from the world’s largest hedge funds lately. Avis Budget Group Inc. (NASDAQ:CAR) was in 28 hedge funds’ portfolios at the end of December. The all time high for this statistic is 44. Our calculations also showed that CAR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Larry Robbins of Glenview Capital

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. Now let’s analyze the new hedge fund action surrounding Avis Budget Group Inc. (NASDAQ:CAR).

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

At the end of December, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CAR over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Avis Budget Group Inc. (NASDAQ:CAR) was held by SRS Investment Management, which reported holding $687.5 million worth of stock at the end of December. It was followed by Pzena Investment Management with a $67.4 million position. Other investors bullish on the company included Glenview Capital, Melvin Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position SRS Investment Management allocated the biggest weight to Avis Budget Group Inc. (NASDAQ:CAR), around 11.36% of its 13F portfolio. Glenview Capital is also relatively very bullish on the stock, setting aside 1.47 percent of its 13F equity portfolio to CAR.

Seeing as Avis Budget Group Inc. (NASDAQ:CAR) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their full holdings by the end of the fourth quarter. Intriguingly, Michael Hintze’s CQS Cayman LP cut the largest position of all the hedgies monitored by Insider Monkey, worth close to $66.5 million in stock, and Robert Pohly’s Samlyn Capital was right behind this move, as the fund sold off about $8.5 million worth. These transactions are interesting, as total hedge fund interest was cut by 6 funds by the end of the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Avis Budget Group Inc. (NASDAQ:CAR) but similarly valued. These stocks are Baozun Inc (NASDAQ:BZUN), Shutterstock Inc (NYSE:SSTK), Moelis & Company (NYSE:MC), Atlantic Union Bankshares Corporation (NASDAQ:AUB), Azul S.A. (NYSE:AZUL), American National Group Inc. (NASDAQ:ANAT), and Liberty Latin America Ltd. (NASDAQ:LILA). This group of stocks’ market valuations are similar to CAR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $1059 million in CAR’s case. Shutterstock Inc (NYSE:SSTK) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Avis Budget Group Inc. (NASDAQ:CAR) is more popular among hedge funds. Our overall hedge fund sentiment score for CAR is 68.1. 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 returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on CAR as the stock returned 109.5% since the end of December (through 4/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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