The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Avis Budget Group Inc. (NASDAQ:CAR) based on those filings.
Is Avis Budget Group Inc. (NASDAQ:CAR) the right pick for your portfolio? The best stock pickers are becoming less confident. The number of long hedge fund positions fell by 4 lately. Our calculations also showed that CAR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CAR was in 23 hedge funds' portfolios at the end of the first quarter of 2020. There were 27 hedge funds in our database with CAR positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26869" align="aligncenter" width="399"] Larry Robbins of Glenview Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to analyze the key hedge fund action regarding Avis Budget Group Inc. (NASDAQ:CAR).
How are hedge funds trading Avis Budget Group Inc. (NASDAQ:CAR)?
At Q1's end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CAR over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Avis Budget Group Inc. (NASDAQ:CAR) was held by SRS Investment Management, which reported holding $225 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $53.2 million position. Other investors bullish on the company included Glenview Capital, Lyrical Asset Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position SRS Investment Management allocated the biggest weight to Avis Budget Group Inc. (NASDAQ:CAR), around 4.89% of its 13F portfolio. Prentice Capital Management is also relatively very bullish on the stock, setting aside 1.88 percent of its 13F equity portfolio to CAR.
Since Avis Budget Group Inc. (NASDAQ:CAR) has witnessed declining sentiment from the aggregate hedge fund industry, it's safe to say that there were a few hedgies who were dropping their entire stakes last quarter. At the top of the heap, Paul Reeder and Edward Shapiro's PAR Capital Management cut the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $7.3 million in stock, and Brandon Haley's Holocene Advisors was right behind this move, as the fund dumped about $4.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Avis Budget Group Inc. (NASDAQ:CAR). These stocks are Gentherm Inc (NASDAQ:THRM), Southside Bancshares, Inc. (NASDAQ:SBSI), Antero Midstream Corp (NYSE:AM), and Plains GP Holdings LP (NYSE:PAGP). This group of stocks' market values are closest to CAR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position THRM,11,54847,-6 SBSI,8,43135,0 AM,14,45083,0 PAGP,22,88065,-4 Average,13.75,57783,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $476 million in CAR's case. Plains GP Holdings LP (NYSE:PAGP) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Avis Budget Group Inc. (NASDAQ:CAR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on CAR as the stock returned 94.9% so far in Q2 (through June 10th) 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.