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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Adient plc (NYSE:ADNT).
Is ADNT a good stock to buy now? Adient plc (NYSE:ADNT) investors should be aware of an increase in enthusiasm from smart money in recent months. Adient plc (NYSE:ADNT) was in 39 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 48. Our calculations also showed that ADNT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Bart Baum of Ionic Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's view the key hedge fund action surrounding Adient plc (NYSE:ADNT).
Do Hedge Funds Think ADNT Is A Good Stock To Buy Now?
At third quarter's end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in ADNT a year ago. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Andrew Wellington and Jeff Keswin's Lyrical Asset Management has the number one position in Adient plc (NYSE:ADNT), worth close to $92.1 million, accounting for 1.7% of its total 13F portfolio. Coming in second is Redwood Capital Management, led by Jonathan Kolatch, holding a $35.1 million position; 2.7% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish include Phill Gross and Robert Atchinson's Adage Capital Management, Renaissance Technologies and Edgar Wachenheim's Greenhaven Associates. In terms of the portfolio weights assigned to each position Newtyn Management allocated the biggest weight to Adient plc (NYSE:ADNT), around 5.67% of its 13F portfolio. Elm Ridge Capital is also relatively very bullish on the stock, setting aside 3.51 percent of its 13F equity portfolio to ADNT.
Consequently, specific money managers have jumped into Adient plc (NYSE:ADNT) headfirst. Iszo Capital, managed by Brian Sheehy, initiated the most outsized position in Adient plc (NYSE:ADNT). Iszo Capital had $3.1 million invested in the company at the end of the quarter. Javier Velazquez's Albar Capital also initiated a $3.1 million position during the quarter. The other funds with brand new ADNT positions are John W. Moon's Moon Capital, Paul Tudor Jones's Tudor Investment Corp, and Bart Baum's Ionic Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Adient plc (NYSE:ADNT) but similarly valued. We will take a look at Celsius Holdings, Inc. (NASDAQ:CELH), Hancock Whitney Corporation (NASDAQ:HWC), Steven Madden, Ltd. (NASDAQ:SHOO), 8x8, Inc. (NASDAQ:EGHT), United States Steel Corporation (NYSE:X), Group 1 Automotive, Inc. (NYSE:GPI), and Hostess Brands, Inc. (NASDAQ:TWNK). This group of stocks' market caps match ADNT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CELH,17,65774,7 HWC,23,82566,0 SHOO,23,88372,3 EGHT,22,384327,1 X,21,71985,1 GPI,24,214897,3 TWNK,30,204785,6 Average,22.9,158958,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $393 million in ADNT's case. Hostess Brands, Inc. (NASDAQ:TWNK) is the most popular stock in this table. On the other hand Celsius Holdings, Inc. (NASDAQ:CELH) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Adient plc (NYSE:ADNT) is more popular among hedge funds. Our overall hedge fund sentiment score for ADNT is 83.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on ADNT as the stock returned 105.6% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.