Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Toyota Motor Corporation (NYSE:TM) to find out whether there were any major changes in hedge funds’ views.
Toyota Motor Corporation (NYSE:TM) investors should be aware of a decrease in support from the world’s most elite money managers lately. Toyota Motor Corporation (NYSE:TM) was in 12 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 18. Our calculations also showed that TM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. With all of this in mind let’s go over the fresh hedge fund action encompassing Toyota Motor Corporation (NYSE:TM).
Do Hedge Funds Think TM Is A Good Stock To Buy Now?
At Q2’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TM over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Toyota Motor Corporation (NYSE:TM), with a stake worth $810.2 million reported as of the end of June. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $56.6 million. 683 Capital Partners, D E Shaw, and PEAK6 Capital Management 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 683 Capital Partners allocated the biggest weight to Toyota Motor Corporation (NYSE:TM), around 1.81% of its 13F portfolio. Fisher Asset Management is also relatively very bullish on the stock, designating 0.51 percent of its 13F equity portfolio to TM.
Because Toyota Motor Corporation (NYSE:TM) has witnessed declining sentiment from the smart money, we can see that there were a few money managers who sold off their entire stakes heading into Q3. At the top of the heap, Renaissance Technologies dropped the largest investment of all the hedgies followed by Insider Monkey, comprising about $32.4 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $16.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 6 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Toyota Motor Corporation (NYSE:TM) but similarly valued. We will take a look at NIKE, Inc. (NYSE:NKE), Netflix, Inc. (NASDAQ:NFLX), The Coca-Cola Company (NYSE:KO), Verizon Communications Inc. (NYSE:VZ), Intel Corporation (NASDAQ:INTC), salesforce.com, inc. (NYSE:CRM), and Cisco Systems, Inc. (NASDAQ:CSCO). This group of stocks’ market caps are similar to TM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NKE | 67 | 6425093 | -11 |
| NFLX | 113 | 13216589 | 3 |
| KO | 62 | 24965786 | 1 |
| VZ | 63 | 10958091 | -6 |
| INTC | 78 | 6764047 | -5 |
| CRM | 108 | 11767293 | 17 |
| CSCO | 60 | 4219112 | 1 |
| Average | 78.7 | 11188002 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 78.7 hedge funds with bullish positions and the average amount invested in these stocks was $11188 million. That figure was $903 million in TM’s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand Cisco Systems, Inc. (NASDAQ:CSCO) is the least popular one with only 60 bullish hedge fund positions. Compared to these stocks Toyota Motor Corporation (NYSE:TM) is even less popular than CSCO. Our overall hedge fund sentiment score for TM is 19. 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. Hedge funds dodged a bullet by taking a bearish stance towards TM. Our calculations showed that the top 5 most popular hedge fund stocks 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 but managed to beat the market again by 3.1 percentage points. Unfortunately TM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); TM investors were disappointed as the stock returned 2.5% since the end of the second quarter (through 11/5) 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 most of these stocks already outperformed the market since 2019.
Follow Toyota Motor Corp (NYSE:TM)
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Disclosure: None. This article was originally published at Insider Monkey.
