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How Did Fiat Chrysler Automobiles NV (FCAU) Compare Against Top Hedge Fund Stocks in 2019?

Reymerlyn Martin

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% in 2019. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Fiat Chrysler Automobiles NV (NYSE:FCAU).

Fiat Chrysler Automobiles NV (NYSE:FCAU) was in 27 hedge funds' portfolios at the end of September. FCAU investors should be aware of a decrease in hedge fund sentiment lately. There were 28 hedge funds in our database with FCAU holdings at the end of the previous quarter. Our calculations also showed that FCAU isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

To most investors, hedge funds are perceived as worthless, old investment tools of the past. While there are over 8000 funds in operation at present, Our researchers hone in on the bigwigs of this club, around 750 funds. These investment experts watch over bulk of the hedge fund industry's total asset base, and by tailing their first-class picks, Insider Monkey has formulated many investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_26088" align="aligncenter" width="600"] Chase Coleman of Tiger Global[/caption]

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we're going to review the latest hedge fund action encompassing Fiat Chrysler Automobiles NV (NYSE:FCAU).

Hedge fund activity in Fiat Chrysler Automobiles NV (NYSE:FCAU)

At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FCAU over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Fiat Chrysler Automobiles NV (NYSE:FCAU) was held by Tiger Global Management, which reported holding $973.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $168.3 million position. Other investors bullish on the company included Pabrai Funds, Two Sigma Advisors, and Nantahala Capital Management. In terms of the portfolio weights assigned to each position Pabrai Funds allocated the biggest weight to Fiat Chrysler Automobiles NV (NYSE:FCAU), around 43.4% of its 13F portfolio. Aquamarine Capital Management is also relatively very bullish on the stock, designating 13.07 percent of its 13F equity portfolio to FCAU.

Seeing as Fiat Chrysler Automobiles NV (NYSE:FCAU) has experienced bearish sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of hedgies that slashed their full holdings last quarter. At the top of the heap, Karthik Sarma's SRS Investment Management said goodbye to the biggest position of the 750 funds followed by Insider Monkey, worth an estimated $36.2 million in stock. Brian Gootzeit and Andrew Frank's fund, StackLine Partners, also dropped its stock, about $7.6 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds last quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Fiat Chrysler Automobiles NV (NYSE:FCAU) but similarly valued. We will take a look at KLA Corporation (NASDAQ:KLAC), McKesson Corporation (NYSE:MCK), Sprint Corporation (NYSE:S), and Lululemon Athletica inc. (NASDAQ:LULU). This group of stocks' market valuations match FCAU's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KLAC,28,784370,4 MCK,39,1982389,3 S,23,885703,-2 LULU,46,1527406,-3 Average,34,1294967,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1295 million. That figure was $1493 million in FCAU's case. Lululemon Athletica inc. (NASDAQ:LULU) is the most popular stock in this table. On the other hand Sprint Corporation (NYSE:S) is the least popular one with only 23 bullish hedge fund positions. Fiat Chrysler Automobiles NV (NYSE:FCAU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. Unfortunately FCAU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FCAU investors were disappointed as the stock returned 17.8% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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