U.S. Markets closed

American Axle & Manufacturing Holdings, Inc. (AXL): Hedge Funds In Wait-and-See Mode

Asma UL Husna

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds' portfolios at the end of September. At the end of this article we will also compare AXL to other stocks including GasLog Partners LP (NYSE:GLOP), US Concrete Inc (NASDAQ:USCR), and Altus Midstream Company (NASDAQ:ALTM) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

[caption id="attachment_758477" align="aligncenter" width="450"] Andy Redleaf of Whitebox Advisors[/caption]

Andy Redleaf Andrew Redleaf Whitebox Advisors

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's check out the latest hedge fund action encompassing American Axle & Manufacturing Holdings, Inc. (NYSE:AXL).

Hedge fund activity in American Axle & Manufacturing Holdings, Inc. (NYSE:AXL)

Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AXL over the last 17 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the largest position in American Axle & Manufacturing Holdings, Inc. (NYSE:AXL). Citadel Investment Group has a $31.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Citadel Investment Group's heels is Kettle Hill Capital Management, managed by Andrew Kurita, which holds a $10.2 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Jonathan Kolatch's Redwood Capital Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Andy Redleaf's Whitebox Advisors. In terms of the portfolio weights assigned to each position Kettle Hill Capital Management allocated the biggest weight to American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), around 2.43% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, dishing out 1 percent of its 13F equity portfolio to AXL.

Because American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) has experienced falling interest from hedge fund managers, it's safe to say that there lies a certain "tier" of money managers that slashed their full holdings in the third quarter. Interestingly, Robert Polak's Anchor Bolt Capital dropped the biggest investment of all the hedgies monitored by Insider Monkey, worth an estimated $9.1 million in stock. Sander Gerber's fund, Hudson Bay Capital Management, also sold off its stock, about $6.6 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to American Axle & Manufacturing Holdings, Inc. (NYSE:AXL). These stocks are GasLog Partners LP (NYSE:GLOP), US Concrete Inc (NASDAQ:USCR), Altus Midstream Company (NASDAQ:ALTM), and Select Energy Services, Inc. (NYSE:WTTR). 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 GLOP,6,15286,1 USCR,15,114418,-2 ALTM,5,6127,-2 WTTR,10,23231,-1 Average,9,39766,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $81 million in AXL's case. US Concrete Inc (NASDAQ:USCR) is the most popular stock in this table. On the other hand Altus Midstream Company (NASDAQ:ALTM) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on AXL as the stock returned 20% during the first two months of Q4 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.

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

Related Content