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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in American Axle & Manufacturing Holdings, Inc. (NYSE:AXL)? The smart money sentiment can provide an answer to this question.
Is American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) a marvelous investment today? The best stock pickers were becoming hopeful. The number of long hedge fund positions increased by 1 lately. American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) was in 21 hedge funds' portfolios at the end of March. The all time high for this statistic is 27. Our calculations also showed that AXL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 20 hedge funds in our database with AXL positions at the end of the fourth quarter.
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 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Andy Redleaf of Whitebox Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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 take a glance at the new hedge fund action surrounding American Axle & Manufacturing Holdings, Inc. (NYSE:AXL).
Do Hedge Funds Think AXL Is A Good Stock To Buy Now?
At first quarter's end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in AXL a year ago. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) was held by D E Shaw, which reported holding $17.8 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $15 million position. Other investors bullish on the company included Lonestar Capital Management, Whitebox Advisors, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Lonestar Capital Management allocated the biggest weight to American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), around 2.26% of its 13F portfolio. Aequim Alternative Investments is also relatively very bullish on the stock, designating 0.16 percent of its 13F equity portfolio to AXL.
Now, specific money managers have been driving this bullishness. ExodusPoint Capital, managed by Michael Gelband, created the biggest position in American Axle & Manufacturing Holdings, Inc. (NYSE:AXL). ExodusPoint Capital had $2.7 million invested in the company at the end of the quarter. Mike Vranos's Ellington also made a $1.1 million investment in the stock during the quarter. The other funds with brand new AXL positions are Donald Sussman's Paloma Partners, Karim Abbadi and Edward McBride's Centiva Capital, and Thomas Bailard's Bailard Inc.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) but similarly valued. We will take a look at Zumiez Inc. (NASDAQ:ZUMZ), Chase Corporation (NYSE:CCF), Boston Private Financial Hldg Inc (NASDAQ:BPFH), Tivity Health, Inc. (NASDAQ:TVTY), MarineMax, Inc. (NYSE:HZO), ProPetro Holding Corp. (NYSE:PUMP), and Zogenix, Inc. (NASDAQ:ZGNX). This group of stocks' market values resemble AXL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZUMZ,20,52649,-1 CCF,9,90070,-2 BPFH,24,182992,7 TVTY,24,381882,4 HZO,15,48512,-3 PUMP,17,75813,-3 ZGNX,21,377360,-9 Average,18.6,172754,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $67 million in AXL's case. Boston Private Financial Hldg Inc (NASDAQ:BPFH) is the most popular stock in this table. On the other hand Chase Corporation (NYSE:CCF) is the least popular one with only 9 bullish hedge fund positions. American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AXL is 69.3. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately AXL wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AXL were disappointed as the stock returned -5.1% since the end of March (through 7/16) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.