Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 37.4% compared to 27.5%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Is Toyota Motor Corporation (NYSE:TM) a cheap investment today? The smart money is in an optimistic mood. The number of long hedge fund positions inched up by 3 recently. Our calculations also showed that TM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). TM was in 11 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with TM holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are assumed to be worthless, outdated financial tools of the past. While there are over 8000 funds in operation at the moment, We look at the aristocrats of this club, approximately 750 funds. It is estimated that this group of investors manage the majority of the hedge fund industry’s total asset base, and by observing their top equity investments, Insider Monkey has revealed several investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the key hedge fund action encompassing Toyota Motor Corporation (NYSE:TM).
How have hedgies been trading Toyota Motor Corporation (NYSE:TM)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in TM a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Toyota Motor Corporation (NYSE:TM), which was worth $163.6 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $67.8 million worth of shares. Orbis Investment Management, Centiva Capital, and Springbok Capital 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 Centiva Capital allocated the biggest weight to Toyota Motor Corporation (NYSE:TM), around 0.33% of its 13F portfolio. Adage Capital Management is also relatively very bullish on the stock, dishing out 0.17 percent of its 13F equity portfolio to TM.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Orbis Investment Management, managed by William B. Gray, assembled the largest position in Toyota Motor Corporation (NYSE:TM). Orbis Investment Management had $7.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $2.1 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Dmitry Balyasny’s Balyasny Asset Management, and John Zaro’s Bourgeon Capital.
Let’s go over hedge fund activity in other stocks similar to Toyota Motor Corporation (NYSE:TM). We will take a look at Anheuser-Busch InBev SA/NV (NYSE:BUD), Oracle Corporation (NYSE:ORCL), China Mobile Limited (NYSE:CHL), and McDonald’s Corporation (NYSE:MCD). This group of stocks’ market caps resemble TM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BUD | 19 | 1800212 | 1 |
| ORCL | 50 | 4360689 | -11 |
| CHL | 12 | 386022 | -1 |
| MCD | 49 | 2075982 | -3 |
| Average | 32.5 | 2155726 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $2156 million. That figure was $243 million in TM’s case. Oracle Corporation (NYSE:ORCL) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Toyota Motor Corporation (NYSE:TM) is even less popular than CHL. Hedge funds dodged a bullet by taking a bearish stance towards TM. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TM investors were disappointed as the stock returned 4.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
