Should You Buy Honda Motor Co Ltd (ADR) (HMC)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Honda Motor Co Ltd (ADR) (NYSE:HMC).

The shares of Honda Motor Co Ltd (ADR) inched down by 6.60% during the third quarter, but the interest from the funds that we track slightly increased and we decided to take a look at which funds are betting on the stock. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Ford Motor Company (NYSE:F), BT Group plc (ADR) (NYSE:BT), and The Bank of Nova Scotia (USA) (NYSE:BNS) to gather more data points.

According to most traders, hedge funds are perceived as underperforming, outdated financial tools of the past. While there are greater than 8000 funds in operation at present, Our researchers hone in on the upper echelon of this group, around 700 funds. These investment experts oversee most of the hedge fund industry’s total capital, and by paying attention to their top picks, Insider Monkey has formulated several investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to take a look at the key action surrounding Honda Motor Co Ltd (ADR) (NYSE:HMC).

Hedge fund activity in Honda Motor Co Ltd (ADR) (NYSE:HMC)

At the Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jim Simons’ Renaissance Technologies has the largest position in Honda Motor Co Ltd (ADR) (NYSE:HMC), worth close to $34.5 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $12.1 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Matthew Hulsizer’s PEAK6 Capital Management, and Ken Griffin’s Citadel Investment Group.
Consequently, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most outsized position in Honda Motor Co Ltd (ADR) (NYSE:HMC). Arrowstreet Capital had $5.8 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.9 million position during the quarter. The other funds with brand new HMC positions are Peter Muller’s PDT Partners, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.

Let’s go over hedge fund activity in other stocks similar to Honda Motor Co Ltd (ADR) (NYSE:HMC). These stocks are Ford Motor Company (NYSE:F), BT Group plc (ADR) (NYSE:BT), The Bank of Nova Scotia (USA) (NYSE:BNS), and Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA). This group of stocks’ market caps resemble HMC’s market cap.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was just $61 million in HMC’s case. Ford Motor Company (NYSE:F) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) is the least popular one with only 4 bullish hedge fund positions. Honda Motor Co Ltd (ADR) (NYSE:HMC) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Ford might be a better candidate to consider a long position.