Hedge funds and large money managers typically invest with a focus on the long term. Therefore, short-lived dips or bumps in the charts usually don’t cause them to change their minds about a company. This time it can be different. The coronavirus pandemic destroyed the high correlations between major industries and asset classes. We are now in a stock picker market where the fundamentals of a stock have more of an impact on price than on the general direction of the market. As a result, we see sudden and large changes in hedge fund positions depending on the flow of news. Let’s take a look at hedge fund sentiment towards AutoNation, Inc. (NYSE:A) to see if the views of hedge funds have changed significantly.
Is a Share a Buy? AutoNation, Inc. (NYSE:A) Investors should watch out for a fall in hedge fund rates lately. AutoNation, Inc. (NYSE:A) was in 23 hedge fund portfolios at the end of the fourth quarter of 2020. The all-time high for this statistic is 36. Our calculations also showed that AN is not one of them 30 Most Popular Stocks Among Hedge Funds (Click here for the Q4 ranking).
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Edward Lampert from ESL Investments
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Do hedge funds think AN is a good stock to buy now?
At the end of December, a total of 23 of the hedge funds tracked by Insider Monkey were optimistic for this stock, a change of -30% compared to the previous quarter. Below you can read about the change in hedge fund sentiment towards AN over the past 22 quarters. So let’s take a look at which hedge funds were among the top owners of the stock and which hedge funds were making big strides.
Among these funds are ESL investments held its most valuable stake in AutoNation, Inc. (NYSE: AN), which was valued at $ 155.9 million at the end of the fourth quarter. In second place was Eminence Capital, which amassed $ 126 million in shares. AQR Capital Management, Arrowstreet Capital and GAMCO Investors were also very fond of the stock and became one of the company’s largest hedge fund owners. In terms of portfolio weights assigned to each position, ESL Investments assigned the largest weighting to AutoNation, Inc. (NYSE: AN), at approximately 61.23% of its 13F portfolio. Steel Canyon capital is also relatively very optimistic about the stock and contributes 3.54 percent of its 13F stock portfolio to AN.
Judging by the fact that AutoNation, Inc. (NYSE: AN) has seen a decline in interest from hedge fund managers, it’s easy to see that there is a certain “tier” of funds that sell their full holdings in the fourth quarter to have. Interestingly, Michael Geland’s ExodusPoint Capital bid farewell to the largest portion of the 750 funds monitored by Insider Monkey, with a total holding of approximately $ 1.4 million. Ray Dalio’s fund, Bridgewater Associates, also trimmed its shares by approximately $ 1.2 million. These bearish behaviors are intriguing to say the least, given that hedge fund rates were cut by a total of 10 funds in the fourth quarter.
Now let’s review hedge fund activity in other stocks similar to AutoNation, Inc. (NYSE: AN). We take a look at Vertiv Holdings Co (NYSE:VRT), Credit Acceptance Corp. (NASDAQ:CACC), Perrigo Co Plc (NASDAQ:PRGO), TopBuild Corp (NYSE:BLD), Mattel, Inc. (NASDAQ:MAT), Devon Energy Corporation (NYSE:DVN) and Western Alliance Bancorporation (NYSE:WHALE). The market values of this group of stocks are similar to the market value of AN.
[table] Ticker, number of HRs with positions, total value of HR positions (x1000), change in HR position VRT, 50.1345343, -1 CACC, 29.771364.0 PRGO, 31.363463.2 BLD, 19.42185, – 2 MAT, 25.858930, -1 DVN, 45.709230.1 WAL, 22.112754, -6 average, 31.6.600467, -1 [/table]
View table here When formatting problems occur.
As you can see, these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $ 600 million. That figure in the case of AN was $ 587 million. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand, TopBuild Corp (NYSE:BLD) is the least popular with only 19 bullish hedge fund positions. AutoNation, Inc. (NYSE: AN) isn’t the least popular stock in this group, but interest in hedge funds is still below average. Our overall hedge fund sentiment score for AN is 20.6. Stocks with a higher number of hedge fund positions relative to other stocks and relative to their historical range receive a higher sentiment score. Our calculations have shown that Top 30 most popular stocks Hedge funds returned 81.2% in 2019 and 2020, outperforming the S&P 500 ETF (SPY) by 26 percentage points. These stocks were up 12.3% through April 19, 2021, still outperforming the market by 0.9 percentage points. A small number of hedge funds also rightly bet on AN as the stock returned 39.8% since the end of the fourth quarter (through April 19) and outperformed the market even better.
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Disclosure: None. This article was originally published at Insider monkey.