Was The Smart Money Right About Avis Budget Group Inc. (CAR)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider Avis Budget Group Inc. (NASDAQ:CAR) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Avis Budget Group Inc. (NASDAQ:CAR) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. Avis Budget Group Inc. (NASDAQ:CAR) was in 27 hedge funds’ portfolios at the end of the second quarter of 2021. 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 Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Michael Gelband of ExodusPoint Capital

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 are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Keeping this in mind let’s check out the recent hedge fund action surrounding Avis Budget Group Inc. (NASDAQ:CAR).

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

Heading into the third quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CAR over the last 24 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in Avis Budget Group Inc. (NASDAQ:CAR) was held by SRS Investment Management, which reported holding $1435.6 million worth of stock at the end of June. It was followed by Two Sigma Advisors with a $72.6 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Intrinsic Edge 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 21.28% of its 13F portfolio. Calixto Global Investors is also relatively very bullish on the stock, setting aside 4.62 percent of its 13F equity portfolio to CAR.

Consequently, specific money managers have jumped into Avis Budget Group Inc. (NASDAQ:CAR) headfirst. Intrinsic Edge Capital, managed by Mark Coe, established the largest position in Avis Budget Group Inc. (NASDAQ:CAR). Intrinsic Edge Capital had $16.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $12.6 million investment in the stock during the quarter. The other funds with brand new CAR positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Michael Gelband’s ExodusPoint Capital, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

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. We will take a look at Open Lending Corporation (NASDAQ:LPRO), Regal Beloit Corporation (NYSE:RBC), MAXIMUS, Inc. (NYSE:MMS), Pilgrim’s Pride Corporation (NASDAQ:PPC), Diversey Holdings, Ltd. (NASDAQ:DSEY), Crane Co. (NYSE:CR), and KBR, Inc. (NYSE:KBR). This group of stocks’ market values resemble CAR’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 $366 million. That figure was $1710 million in CAR’s case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand Diversey Holdings, Ltd. (NASDAQ:DSEY) is the least popular one with only 12 bullish hedge fund positions. Avis Budget Group Inc. (NASDAQ:CAR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CAR is 59.7. 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 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on CAR as the stock returned 281.9% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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