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Axalta Coating Systems Ltd (AXTA): Are Hedge Funds Right About This Stock?

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider Axalta Coating Systems Ltd (NYSE:AXTA) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Axalta Coating Systems Ltd (NYSE:AXTA) has seen an increase in support from the world's most elite money managers lately. Axalta Coating Systems Ltd (NYSE:AXTA) was in 47 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 60. There were 43 hedge funds in our database with AXTA holdings at the end of March. Our calculations also showed that AXTA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

According to most traders, hedge funds are perceived as slow, old investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, We choose to focus on the moguls of this group, around 850 funds. These money managers control the majority of all hedge funds' total capital, and by shadowing their inimitable equity investments, Insider Monkey has discovered numerous investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. With all of this in mind let's take a look at the latest hedge fund action encompassing Axalta Coating Systems Ltd (NYSE:AXTA).

Do Hedge Funds Think AXTA Is A Good Stock To Buy Now?

At second quarter's end, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AXTA over the last 24 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Axalta Coating Systems Ltd (NYSE:AXTA) was held by Rivulet Capital, which reported holding $192.4 million worth of stock at the end of June. It was followed by Ariel Investments with a $170.1 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Gates Capital Management. In terms of the portfolio weights assigned to each position Rivulet Capital allocated the biggest weight to Axalta Coating Systems Ltd (NYSE:AXTA), around 10.9% of its 13F portfolio. Parsifal Capital Management is also relatively very bullish on the stock, designating 6.09 percent of its 13F equity portfolio to AXTA.

Consequently, key hedge funds have been driving this bullishness. Gates Capital Management, managed by Jeffrey Gates, established the most outsized position in Axalta Coating Systems Ltd (NYSE:AXTA). Gates Capital Management had $120.8 million invested in the company at the end of the quarter. Parag Vora's HG Vora Capital Management also made a $53.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen's Point72 Asset Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and James Crichton's Hitchwood Capital Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Axalta Coating Systems Ltd (NYSE:AXTA) but similarly valued. These stocks are Digital Turbine Inc (NASDAQ:APPS), Ascendis Pharma A/S (NASDAQ:ASND), Brooks Automation, Inc. (NASDAQ:BRKS), Freshpet Inc (NASDAQ:FRPT), Harley-Davidson, Inc. (NYSE:HOG), Mattel, Inc. (NASDAQ:MAT), and First Financial Bankshares Inc (NASDAQ:FFIN). All of these stocks' market caps resemble AXTA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APPS,30,325569,8 ASND,29,2290305,1 BRKS,32,510367,7 FRPT,28,270573,9 HOG,37,1121681,9 MAT,25,928960,0 FFIN,8,25565,-3 Average,27,781860,4.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $782 million. That figure was $1490 million in AXTA's case. Harley-Davidson, Inc. (NYSE:HOG) is the most popular stock in this table. On the other hand First Financial Bankshares Inc (NASDAQ:FFIN) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Axalta Coating Systems Ltd (NYSE:AXTA) is more popular among hedge funds. Our overall hedge fund sentiment score for AXTA is 82.5. 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 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 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Unfortunately AXTA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AXTA were disappointed as the stock returned -4.1% since the end of the second quarter (through 10/1) 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 most of these stocks already outperformed the market since 2019.

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